What a trustee does in a Chapter 13 case

On Behalf of | Feb 10, 2020 | Chapter 13 Bankruptcy |

When a debtor chooses to file for bankruptcy, a trustee is assigned to oversee the case. This is because the debtor’s property is put into a bankruptcy estate, which is a separate entity from the person who is filing for bankruptcy. This is generally true whether a person is filing for bankruptcy in Tennessee or any other state, and it is also true whether an individual is pursuing a Chapter 7 or 13 proceeding.

There are several key differences between a Chapter 7 and Chapter 13 case, and these differences influence the role that the trustee plays. In a Chapter 7 case, the person overseeing the bankruptcy estate will be in charge of liquidating property and managing payments to creditors. In a Chapter 13 proceeding, debtors will likely keep most or all of their property.

This means that there is generally no need to worry about inventorying assets, selling them and distributing the proceeds to creditors. Instead, the trustee is responsible for reviewing and approving the payment plan that a debtor proposes. This individual may also object to portions of the plan if there is cause to do so. If a payment plan is approved, the trustee is responsible for collecting money from the debtor per its terms. After collecting the money, the person overseeing the case will distribute the funds to banks or other creditors.

Individuals who are interested in keeping their home, car or other assets during a bankruptcy proceeding will likely benefit most from filing for Chapter 13 bankruptcy. Doing so may allow debtors to get current on past due mortgage or auto loan payments. It may also allow them time to renegotiate the terms of their current loans or sell property before it can be repossessed or foreclosed upon by a creditor.


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