If you’re in a Chapter 13 bankruptcy (or considering filing), you’ve probably asked yourself:
“Where is my money going?”
“Why am I paying the trustee?”
“Are they keeping part of it?”
“Do creditors actually get paid?”
These are fair questions — especially when you’re making monthly payments for years.
Here’s a clear breakdown of what a Chapter 13 trustee actually does with your money.
First: The Trustee Doesn’t Just “Hold” Your Money
A Chapter 13 trustee is basically the financial administrator of your bankruptcy case.
When you make your Chapter 13 plan payment each month, the trustee:
- receives your payment
- tracks it
- deposits it
- accounts for it
- and distributes it according to court rules
They are responsible for managing thousands of cases at once and making sure your payment plan is followed properly.
Where Does Your Monthly Payment Go?
When your payment goes to the trustee, it is generally divided into several categories:
1. Trustee Fee
Yes — the trustee receives a percentage fee.
This is used to cover the cost of operating the trustee’s office, including staff, systems, audits, and administrative work.
It’s not just “extra profit,” even though it can feel that way.
2. Attorney Fees (In Many Cases)
In many Chapter 13 cases, your attorney is paid through the plan.
That means the trustee may distribute part of your payment to your attorney until the attorney fee is paid in full.
3. Secured Creditors
These are debts tied to property, such as:
- mortgage arrears
- car loans
- car loan catch-up payments
If you were behind on your mortgage or car before filing, Chapter 13 often allows you to catch up through the plan.
4. Priority Debts
These are debts that must be paid before most others, such as:
- certain tax debts
- child support
- spousal support
If you owe priority debts, the trustee uses part of your plan payment to pay those.
5. Unsecured Creditors
These are debts like:
- credit cards
- medical bills
- personal loans
- old utility bills
Unsecured creditors typically get paid last, and the amount they receive depends on your income, budget, and the terms of your confirmed plan.
Some people repay a small percentage.
Others repay much more.
Does the Trustee Pay Creditors Every Month?
Usually yes.
The trustee collects payments and then distributes funds on a schedule, often monthly or periodically, depending on:
- court procedures
- the plan structure
- how much has been paid in
- whether creditors filed claims properly
Creditors must also file something called a Proof of Claim in order to receive money.
If they don’t file a claim, they may not get paid at all.
What Else Does the Trustee Do?
The trustee also:
- reviews your income and expenses
- checks that your plan payment is fair
- verifies tax returns
- monitors missed payments
- objects to improper claims
- ensures creditors are paid correctly
- reviews any major changes in your finances
- may require turnover of tax refunds (in some cases)
- files reports with the court
In short:
The trustee is basically the “referee” making sure the plan is followed.
Why Does It Feel Like Creditors Aren’t Getting Paid?
Many people get frustrated because they make payments for months and feel like nothing is happening.
That’s often because early plan payments go toward:
- trustee fees
- attorney fees
- secured arrears
- priority debts
Unsecured creditors may not see money right away.
That doesn’t mean the system isn’t working — it means the plan is paying debts in the required order.
The Bottom Line
If you’re in Chapter 13, the trustee is not just collecting money.
They are:
✅ managing your case
✅ distributing payments
✅ paying creditors in the correct order
✅ monitoring compliance
✅ ensuring the plan follows bankruptcy law
Your payment may go toward trustee fees, attorney fees, secured debts, priority debts, and then unsecured creditors.
Final Thought
Chapter 13 can feel frustrating because it’s a long process — but the trustee’s role is to make sure your payments are properly handled and that you reach the finish line successfully.
If you’re making your payments on time, you’re doing exactly what you need to do to earn your fresh start.
