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The duties of a Chapter 13 trustee

The numerous differences between Chapter 7 and Chapter 13 bankruptcy have been discussed in previous posts on this blog. Chapter 13 differs from the “liquidation” bankruptcy option, Chapter 7, in the sense that debt is restructured to allow debtors to repay their creditors, rather than the slate being wiped clean. This type of bankruptcy can be beneficial to residents of Washington, D.C., who have a steady income and who don’t qualify for Chapter 7 bankruptcy, but still need an effective debt relief option.

According to the Administrative Office of the United States Courts, there are numerous advantages Chapter 13 bankruptcy may have over Chapter 7. For example, under Chapter 13, one may be able to prevent the foreclosure of a home. Debt reorganization through this method is convenient, making it possible to repay debt under an affordable plan. Also, debtors will not be in contact with their creditors during the process – a Chapter 13 trustee will take care of distributing these payments.

What exactly is the job of a Chapter 13 bankruptcy trustee? These professionals have more tasks than just sending payments to a debtor’s lenders, states the United States Department of Justice. Some of the jobs of a bankruptcy trustee include:

  • Examining a debtor’s finances and debts
  • Working with the debtor to come up with a viable repayment plan that utilizes the debtor’s disposable income in the most effective way
  • Proposing the plan to the bankruptcy court with the goal of being fair to all creditors involved
  • Receiving payments and distributing them to creditors as required in the court-approved plan
  • Keeping accurate records of funds received, as well as how much each creditor has been paid

The terms of a Chapter 13 bankruptcy may be complex, but the goals of the court and the trustee are to make them as fair as possible to the debtor as well as creditors. An experienced bankruptcy attorney may serve as an advocate during the process to protect the rights of those struggling with debt.

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