In Chapter 13 bankruptcy, you pay the Chapter 13 bankruptcy trustee the monthly payment required by your Chapter 13 repayment plan. The trustee distributes the funds to creditors each month. Here's how it all works.
You won't wait until the court confirms (approves) 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:
Keep in mind that the trustee will take action to dismiss your case if you fall behind on your payments.
An easy way to make sure that 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 creditor's meeting date for 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, both the trustee and creditors will have an opportunity to object to the provisions. If you aren't able to work out the problem informally, you'll respond to the objections. The bankruptcy judge will decide whether to approve 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 place in your district. You'll likely continue to mail payments to the Chapter 13 trustee or pay through an online system. If you're working, the court might order your employer to withdraw the payment directly out of your paycheck and forward it to the Chapter 13 trustee through a wage deduction order.
Depending on your court's procedures, initial payments will likely be limited to your attorney's fees and secured claims, such as your mortgage and car loan, until the court approves the plan and signs a confirmation order. This protects the interests of the secured creditors. It can also help you avoid falling farther behind.
After confirmation, your payment will include unsecured creditors—those holding debts such as credit card balances, medical bills, and personal loans. First, however, the trustee will review the proof of claim forms submitted by your creditors.
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.