Legal Question in Bankruptcy in California

What your nephew is doing is illegal. He income is property of the bankruptcy estate and he shouldn't be paying you directly at all.

Thank your nephew for the checks because you are probably not entitled to anything. In Chapter 13 your nephew is not supposed to pay any debts. Everything goes to the trustee who collects the plan payments and distributes the funds to the creditors in accordance with the type of claim each creditor has (such as secured, priority or general unsecured). In most cases the general unsecured claims such as you would get nothing. Your nephew probably failed to disclose the debt to you in his bankruptcy petition as required and is paying you from funds he represented to the trustee were needed by him for living expenses. Therefore, what he is doing is not legal.

Your nephew may want to talk to his lawyer because what he is doing is illegal and may jeapordize his case. It also puts you at legal risk as you may get sued by the Trustee to recover monies illegally paid to you.