Chapter 13 Runs on a Fee the Debtor Pays Before Anyone Else Does

A Chapter 13 bankruptcy isn't run by a judge alone.▸ Every case is assigned to a "standing trustee" — a private attorney appointed by the Justice Department's U.S. Trustee Program, not a federal employee — who collects the debtor's monthly plan payment, holds it, and pays it out to creditors. The trustee's own paycheck comes out of that same stream: a percentage fee, set district by district, deducted before a dollar reaches anyone the debtor owes. No congressional appropriation touches it. The debtor funds the office that administers their own bankruptcy.

The fee is capped by statute — 28 U.S.C. § 586(e) limits it to 10% of plan payments — but within that ceiling, the Executive Office for U.S. Trustees sets each district's actual rate based on that trust operation's own compensation and expenses.▸ Add up what the fee funds nationally and the U.S. Trustee Program's own account of its audit costs does the math for you: trust operations spent about $1.9 million on 164 independent CPA audits in FY2025, which the USTP says was 0.64% of that year's total trust operation expenses — implying a national trust operations budget of roughly $297 million, funded entirely by the fee.

Almost all of it — $292.5 million, or 98.5% — pays trustee compensation, office staff, and the systems that track millions of individual payments.▸ Oversight is a rounding error by comparison: independent audits cost $1.9 million, an average of less than $12,000 per audit, and bank charges ran $2.5 million. None of this $297 million shows up in a federal budget line, because none of it is federal money. It's debtors' money, collected before their creditors see a cent of what they're owed. Separately, and on top of that operating budget, trustees actually distributed $4.4 billion to creditors under confirmed plans in FY2025 — the far larger number the fee revenue exists to administer.

Because the Executive Office for U.S. Trustees sets the rate district by district rather than nationally, two debtors on identical repayment plans can owe meaningfully different amounts depending only on where they filed.

In the current national schedule, the Western District of Kentucky charges 4.6% — the lowest rate on the schedule.▸ The Northern District of California, like more than half the districts checked, charges the full 10% the statute allows. A debtor paying down $1,000 a month in Louisville effectively keeps about $54 more of it for creditors, each month, than an identical debtor in San Francisco — not because Congress wrote a different law for each of them, but because each district's trust operation sets its own rate to cover its own costs.

Until a bankruptcy judge confirms the debtor's repayment plan, the trustee is only holding the money — Chapter 13 gives the debtor a chance to test whether the proposed payments are even feasible before the plan is locked in.▸ Some cases never clear that bar: plans get dismissed for missing paperwork, missed payments, or a debtor's own decision to walk away before confirmation. For years, trustees kept the percentage fee anyway, arguing they'd earned it by holding and safeguarding the money. Four federal appeals courts have now said no.

The Tenth Circuit went first, ruling in Goodman v. Doll (57 F.4th 1129, Jan. 18, 2023) that a trustee isn't entitled to the fee unless a plan is confirmed.▸ The Ninth Circuit agreed five months later in Evans v. McCallister (June 12, 2023), reading the same statutes to mean a trustee only "collects" the fee once payments are made "under" a confirmed plan — before that, she merely "retains" them for the debtor. The Seventh Circuit joined in Marshall v. Johnson (May 3, 2024), and the Second Circuit followed in In re Soussis (No. 22-155, May 9, 2025) — where the facts made the stakes concrete: a Long Island trustee had kept $20,592 out of $362,100 a debtor paid in before her case was dismissed, and the court ordered it returned.

None of these rulings apply outside their own circuits, and the Supreme Court has not taken up the question.▸ A debtor whose Chapter 13 case falls apart before confirmation in New York, California, Illinois, or Colorado is now entitled to every dollar back, fee included. The identical debtor in most of the rest of the country is not — because four circuits have ruled, and the rest simply haven't been asked yet.

Figures are national totals and selected-district comparisons for fiscal and calendar year 2025 as reported by the sources cited; the $297 million trust-operations total is derived by this publication from percentages the U.S. Trustee Program published, not a figure the USTP states as a single number itself.