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.
This Chapter is for individuals who have a steady income. An individual with a steady income may simply need some relief from the collection efforts of creditors and an extension of time in which to repay debt.
The Chapter 13 Plan
A Chapter 13 debtor must propose a plan that devotes all disposable income to debt repayment over a period of up to five years. For some debtors with a certain monthly income the repayment plan will be over the course of three years. However, the bankruptcy court could extend this period of time for good reason. The plan will never exceed the length of five years.
One benefit of this new payment plan is that creditors are not permitted to attempt to collect debts during this time. This gives an individual debtor, with an income, an opportunity to meet the payment schedule over the course of the plan fairly and without hassle or interference from creditors.
The Chapter 13 Trustee
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.
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.
In a Chapter 13 bankruptcy, the individual debtor makes payments under the plan to the bankruptcy trustee who will give appropriate amounts to the appropriate creditors. The individual debtor himself or herself does not have to deal directly with the creditors.
Additionally, a debtor under a Chapter 13 repayment plan is not permitted to acquire new debt without consulting with the bankruptcy trustee. The purpose of this requirement is to help ensure the success of the debtor under the plan. New debt may negatively affect the debtor’s ability to repay existing debt under the plan.