In Chapter 13 bankruptcy, you pay the Chapter 13 bankruptcy trustee the monthly payment required by your Chapter 13 repayment plan and the trustee distributes the funds to creditors each month. In this article, you'll learn how all aspects of Chapter 13 trustee payments work, including the following:
You'll also learn that the Chapter 13 trustee receives a portion of your monthly plan payment and the maximum percentage the trustee can take.
You won't wait until the court approves or "confirms" your plan to start making your proposed plan payment. You'll start paying the Chapter 13 trustee within a month after filing.
Although it might seem odd to make payments before plan approval, the rule makes sense because it accomplishes the following:
Keep in mind that the trustee will take action to dismiss your bankruptcy case if you fall behind on your payments.
An easy way to ensure you pay the trustee on time is this: After the court sends you the trustee's name, check the trustee's website for payment instructions (or call the office). You'll want to know:
The court will also send you the date for the 341 meeting of creditors shortly after you file. If the court schedules the hearing less than a month later, the trustee will likely explain the payment procedure at the meeting. For instance, you might get payment address stickers or receive other instructions.
After you file your plan, the trustee and creditors can object to the provisions. In most cases, you'll try to work out any issues informally. If you can't, you'll respond to the objections by filing a pleading with the court and serving it on the trustee and interested parties. The bankruptcy judge will decide whether to approve or "confirm" your plan at a Chapter 13 confirmation hearing.
Once the court confirms your plan, you'll pay the amount approved by following the procedures in your district. You'll likely continue to mail payments to the Chapter 13 trustee or pay online. If you're working, the court might order your employer to withdraw the amount from your paycheck and forward it to the Chapter 13 trustee through a wage deduction order.
The first payments will likely be limited to your attorney's fees and secured claims—such as your mortgage and car loan—until the court confirms your plan. This policy protects the interests of the secured creditors and can help you avoid falling farther behind important bills, like your house or car payment. After confirmation, your payment will include unsecured creditors—those holding debts such as credit card balances, medical bills, and personal loans.
To determine the amount to pay on each debt, the trustee will review the proof of claim forms submitted by your creditors. You, the trustee, and other creditors will have an opportunity to object to claims as part of the process. Find out about the different types of creditor claims in bankruptcy.
Most Chapter 13 trustees maintain a website filers can use to see an accounting of the payments made by you to the trustee and the disbursements made to your creditors. If you can't find the accounting online, contact the Chapter 13 trustee's office for help. You'll find the contact information on the initial notices sent by the bankruptcy court.
Unlike Chapter 7 trustees, Chapter 13 trustees don't sell property and receive a percentage of sales proceeds dispersed to creditors. Instead, Chapter 13 trustees receive up to 10% of the monthly amount paid to creditors each month. Learn more about how trustees get paid in bankruptcy (scroll down the page for Chapter 13 specifics).
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