There is a misunderstanding among a few people who elect to go through Chapter 13. I want to emphasize “few” – this is by no means a common misunderstanding. But I’ve had to debunk this myth one too many times, so it’s time to put this out there and clarify.
The Chapter 13 Trustee is NOT an independently wealthy individual who pays all of your debts for you, and then you pay the Trustee back over the course of your Chapter 13 Plan.
The Chapter 13 Trustee acts as a conduit for your payments to creditors. You make payments to the Trustee, and the Trustee then redistributes those funds to your creditors in a manner (order of priority and amounts) that are dictated by the terms of the Plan, statutes, and other regulatory policies.
Your creditors are enjoined from pursuing you separately for their unpaid balances while you are in bankruptcy, until at the end when you ultimately receive your discharge from certain remaining unpaid balances.
If you default – if you make less than your full monthly plan payment or if you stop making your plan payments altogether – the Trustee simply will not have funds to pay your creditors. It should not come as a surprise to anyone that individual creditor accounts show no recent payments from the Trustee if you have stopped making plan payments to the Trustee.