Minnesota Bankruptcy Trustees: Administration of the Chapter 13 Plan

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.

Chapter 13 Basics

A Chapter 13 bankruptcy will also be referred to as a wage earner’s plan. The purpose of a Chapter 13 bankruptcy is not to wipe clean all of an individual’s dischargeable debts like in a Chapter 7 bankruptcy. Rather, the purpose of a Chapter 13 bankruptcy is to allow a person who earns regular wages to repay some or all of existing debt in a manner that is feasible for the individual.

Chapter 13 Qualification

In order to qualify for filing a Chapter 13 bankruptcy, an individual must have a regular income. Self-employed individuals have a regular income as well as individuals employed by others. Additionally, the person’s unsecured debt must be less than $360,475 and the person’s secured debts must be less than $1,081,400. These amounts are set by law but are adjusted periodically.

Individuals may not file a bankruptcy petition under Chapter 13 of the United States Bankruptcy Code if, in the last one hundred eighty days, the individual had a prior bankruptcy petition dismissed for failure to appear before the court or comply with court orders.

There are other circumstances that may make an individual debtor ineligible for filing a Chapter 13 bankruptcy petition as well.

Additionally, corporations and partnerships do not qualify for Chapter 13 bankruptcy filings.

Administration of 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.

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.