July 20, 2018

Chapter 13 Trustees Looking to Squeeze Every Last Dime from Debtors

Over the past couple of years I have noted an unsettling trend in my Chapter 13 casesTrustees in the Northern District of Georgia are scrutinizing budgets line by line and are objecting to budget items in an attempt to force debtors to increase their trustee payments.

I am even receiving objections to the total amount of expenses claimed.  In a recent case, for example, the trustee filed a supplemental objection a week before confirmation which asserted that the debtor’s total claimed monthly expenses were too high.  When I called, he pointed out four or five specific line items and I obtained and presented supporting documentation from my client.

My client advises me that he is literally having difficulty buying food and the trustee acknowledged that our claimed expenses were legitimate but he would not back off his objection because the total payout to unsecured creditors was less than 50 cents on the dollar.  There is no resolution yet, but we agreed to reset the confirmation until after the date that all claims are due – presumably some of the unsecured creditors will not file claims, meaning that the ones who do will receive a higher payout.

I would note that no creditors have filed any objections and my client is paying well over $1,000 per month.

It appears that the trustees in the Northern District of Georgia are expecting that Chapter 13 plans should pay at least half, if not more, to unsecured creditors.  I am not blaming our Chapter 13 trustees – I suspect that they are given their marching orders by the U.S. Attorney’s Office and others in the Executive Branch of government.

I have several concerns with this development:

First, the net effect of the trustee’s approach is to squeeze middle class families – those with household incomes of $80,000 to $120,00 per year.  These folks will usually fit into Chapter 7 because of the means test, their pre-filing lifestyles usually produce significant (i.e., $20,000 ore more) of unsecured and credit card debt, but their monthly expenses are such that they do not have enough left over to pay a huge percentage back to unsecureds.  Further, this type of debtor tends to delay filing because they do see bankruptcy as a last resort.

Second, the budgets that the trustees are demanding do not account for unexpected expenses and emergencies that anyone will face over the course of 5 years.  In other words, these plans are almost set up to fail.  I don’t see that creditors, debtors or the economy as a whole benefits when honest, hardworking debtors are forced to commit to a repayment plan that will be almost impossible to fulfil.

Third, this trustee policy creates a disincentive for people to file Chapter 13 cases.  I have had debtors say to me “why shouldn’t I just quit my job, wait a few months until I meet the means test, then file Chapter 7 as opposed to working like a dog to keep a Chapter alive when the deck is stacked against me?”  While this type of activity would be considered unacceptable “income suppression” by the United States trustee, I fear that the Chapter 13 trustees’ hard line approach may encourage people to take the risk.

I once had a long conversation with one of the attorneys in the United States’ trustee’s office who told me that their policy was to discourage Chapter 7 cases and encourage more people to file Chapter 13, where they could pay at least some of their debts.  I think its time that the U.S. Trustee and the Chapter 13 trustee reconsider the punitive nature of how they look at Chapter 13 cases and create a framework where these cases have a better likelihood of working.  Accepting budgets that allow for emergency expenses would be a good start as would backing off when no creditor is objecting is another.

About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.


  1. Jonathan,

    I couldn’t agree more. I have seen several ridiculous objections in the last few months that made my skin crawl. Other than amending the Plan, a new car transmission or any other event typically paid out of an “emergency fund” can spell disaster for a debtor’s ability to pay into the plan.

  2. You could not be more right. In some of my cases, the Chapter 13 Trustees want more than 100% Plan payments due to the fact that my clients have some unencumbered property. They are literally squeezing my clients. Hence, give up the property or keep the property and pay 100% if not more.

  3. Robert, how could a Chapter 13 trustee demand more than 100% of debt owed?

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