In Chapter 13 bankruptcy, the United States Trustee supervises the private trustees who administer Chapter 13 cases. In this chapter, the trustee does not liquidate the debtor’s assets, but instead evaluates the debtor’s financial affairs and makes recommendations to the court regarding the debtor’s proposed repayment plan.
Purpose of Chapter 13 Bankruptcy
Chapter 13 bankruptcies are intended to help an individual who earns a regular income pay back some or all debts according to a plan that is actually feasible over a certain period of time. This is called the “wage earner’s plan.”
Advantages of Chapter 13 Bankruptcy
A Chapter 13 debtor must propose a plan that devotes all disposable income to debt repayment over a period of up to five years. Usually, the repayment must occur within three years if the debtor’s monthly income is less than the applicable state median, but the court may approve a longer period of time if there is a good reason to do so.
Chapter 13 differs from Chapter 7 in that there is a plan in Chapter 13 to repay debt. Chapter 13 also has advantages over Chapter 7 for certain individuals who have homes that will go into foreclosure. Chapter 13 bankruptcy filings may stop a proceeding for foreclosure and the individual debtor may pay past due mortgage payments over time.
Through Chapter 13 bankruptcy, payments may be lower than they otherwise would be, allowing an individual the time to repay the debts with his or her regular income.
There are limitations on who can file a bankruptcy petition under Chapter 13, based on prior filings and dismissals, among other things.
Chapter 13 Trustees
Most Chapter 13 cases are administered by “standing trustees” appointed by the United States Trustee to administer all cases filed in a particular geographic area.
Individual debtors do not actually have contact with creditors. Contact with creditors is the role of the Chapter 13 trustee.
As with Chapter 7 panel trustees, the United States Trustee supervises the Chapter 13 standing trustees’ administration of individual bankruptcy estates; monitors the trustees’ financial record-keeping; and imposes other requirements to ensure that the trustees carry out their fiduciary duties. The United States Trustee’s supervisory actions include:
- Periodically reviewing the trustees’ case reports, budget reports, bank account information, management skills, court performance, and similar information.
- Ensuring that trustees are bonded.
- Ensuring that trustees are independently audited.
- Determining trustees’ maximum annual compensation and actual necessary expenses.
- Providing training for trustees.
- Monitoring trust account funds.