How the Chapter 13 Bankruptcy Trustee Pays Creditors

Learn about making payments to the Chapter 13 bankruptcy trustee.

By , Attorney · University of the Pacific McGeorge School of Law

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:

  • how to make your payment to the Chapter 13 trustee
  • how the Chapter 13 trustee pays creditors, and
  • how to check on the amount paid to creditors.

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.

How Are Chapter 13 Trustee Payments Made?

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:

  • provides an incentive to calculate the correct payment
  • helps ensure good faith use of the bankruptcy process, and
  • lets you complete your 36- or 60-month plan on time.

Keep in mind that the trustee will take action to dismiss your bankruptcy case if you fall behind on your payments.

Chapter 13 Trustee Payments: How to Pay the Chapter 13 Trustee

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:

  • when the first payment is due
  • where to send your payment, and
  • whether to pay by check, money order, cashier's check, or in some other manner.

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.

Continuing Payments After Chapter 13 Plan Confirmation

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.

How Do Creditors Get Chapter 13 Trustee Payments?

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.

Making Sure Creditors Receive Trustee Bankruptcy Payments

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.

Chapter 13 Trustee Payments: How Do Chapter 13 Trustees Get Paid?

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).

Need More Bankruptcy Help?

Did you know Nolo has made the law easy for over fifty years? It's true—and we want to ensure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

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Helpful Bankruptcy Sites

Department of Justice U.S. Trustee Program

United States Courts Bankruptcy Forms

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

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