Posted by Dalton on May 16, 2014
A bankruptcy in chapter 13 is not something that can simply be filed without any oversight. The bankruptcy is overseen by the chapter 13 trustee’s office. The purpose and function of a chapter 13 bankruptcy trustee is quite a different animal than a chapter 7 trustee. They have a job of confirming the chapter 13 repayment plan. After the plan has been confirmed, the ch. 13 trustee then holds the responsibility of accepting payment in the plan and making distributions to creditors. For this, they take 10% of the plan payments. This is a way that the chapter 13 bankruptcy trustee receives incentive to look out for the rights of unsecured creditors. The 10% is a sort of commission that encourages them to fight to have higher plan payments.
The ch 13 plan allows for creativity of a significant nature. The bankruptcy repayment plan is not allowed to treat one creditor any differently than another. By not allowing for discrimination among creditors for unfair or preferential treatment. Unsecured creditors must be paid at a minimum, the financial value which the ch. 7 liquidation bankruptcy would have paid them. Secured creditors in a chapter 13 must accept or reject the bankruptcy plan. They can receive collateral, retain liens which are existing and further receive monthly plan payments at a discounted present value equal at minimum to collateral value. However, exceptions to this include lien stripping if they are purchase money security interests.
Another interesting situation regarding a chapter 13 trustee is this. On one side of the bankruptcy table you have the creditors–on the other you have the debtor. One one side of the table you have the creditor attorneys, and the other side holds a chair for the debtor bankruptcy attorney. In the middle is the trustee, yet the trustee in some ways must be blind while at the same time being giving incentive to seek a higher payment from the debtor. The dallas bankruptcy lawyer who represents a creditor seeks on the other hand has a legal and fiduciary responsibility to look out for the debtor. In such manner, they seek to lower the plan payment while the trustee seeks to raise it.
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