How Do Bankruptcy Trustees Get Paid

How Do Bankruptcy Trustees Get Paid? 2 Critical Variations

In this article, we’ll explore all of the possible scenarios to the question: “How Do Bankruptcy Trustees Get Paid?”

In a case of bankruptcy, property or assets the court confiscates from the debtor are often administered and governed by a body called “trustees” until the matter gets resolved and the debts are settled.

Now you must be wondering that do the trustees get paid for this job. For example:

What is their payment like?

Do they get to use the properties and assets?

What are the requirements for the trustees to be paid a certain amount?

In this article, we will discuss the kinds of payments made to the trustees for this job, the slab they are paid under, etc. You must read on to find out. 

How Do Bankruptcy Trustees Get Paid?

Before we discuss the trustees’ pay-checks, we should find out the roles that have to play. Here we are going to discuss two types of bankruptcy- Chapter 7 and Chapter 13. The role that the trustees’ play is each of these cases is different from the other.

For instance, in case of a Chapter 7 bankruptcy, the trustees must sell off the properties to gather cash to repay the creditors. In Chapter 13, the trustees are required to collect monthly instalments from the debtor to pay the creditors over some time. Other general duties also need to be followed by the trustees. 

The trustees are required to find out from the debtor if he is hiding any money or assets. If yes, then that too needs to be confiscated. They are in full responsibility of the properties that are a part of the bankruptcy until the case is solved. They need to document a final report once the case is resolved. 

The fees of the trustees vary from case to case. For instance, if he manages a large estate worth millions, a chapter 13 trustee will receive will be different from a trustee working with an improvised debtor under chapter 7. However, there is still a minimum payment that has been decided by the court at is a minimum of 5%. 

Types of Bankruptcy and Their Method of Payment to Trustees

Above, we have discussed the types of bankruptcy trustees their fees. Let’s discuss this in detail. 

Chapter 7 Trustees

The basic administrative fee for a Chapter 7 trustee is flat $60. This administrative fee comes from the fee which you have paid while filing a case. If the court decided to waive the case filing fee, the trustees are not paid anything.

Secondly, the trustees also earn a commission from the properties that they sell to pay the creditors. They have a share of the profit. If the debtor does not have any assets, and there are no returns from the lawsuit, tax refunds, etc., the trustee does not receive any other amount. 

When the trustees sell off the properties and assets and collect the amount to make a payment to creditors, they also receive a commission on the collected amount. There is something called the sliding scale commission, which has the following percentage.

Ranging from the first $5000 disbursed- 25% and ranging up to 1,000,000- 3%. There are other sources of income for Chapter & trustees, like fees for professional accounting.

Chapter 13 Trustees 

The payment for Chapter 13 trustees is a little complicated. In this case, the trustees do not sell your properties and keep them safe and, in return, collect a certain amount every month. This amount is part of the payment that you make for the creditors.

The trustees, in this case, need the court’s approval to get the payment. As per the bankruptcy law, a maximum percentage of 10% of plan payment is allowed for the trustees. The trustees under Chapter 13 will have to meet the expenses and cost within this limit.

The trustees are paid a salary under the federal law as they are appointed as standing trustee by the district. These trustees’ annual salary is as per the executive V level employee under the federal government, inclusive of the benefits.

However, the trustees must file an operating budget with the United States Trustee’s office, which is part of the Department of Justice. If approved, after looking through the proposal, it sets a limit to cost and compensation for the trustees to recover. 

What information does a bankruptcy trustee have access to?

The trustees try to get their hands on your bank details, your income statement, your assets, and properties declared and compare with the details that you have submitted in the court while filing a case.

They look into the assets and determine if there is more amount that you could pay to the creditors but are not accepting otherwise. They look into your budget and expenses. They also have the right to inspect any hidden assets or amounts transferred recently. And if they find a discrepancy, they have every right to ask or wait for the 341 meetings of creditors.

Summary

When it comes to payment, the trustees are paid well either through salary or through compensation. Their commission involves a portion of the amount you will pay as a part of bankruptcy case expense. 

Video 

Here is a video that vividly explains the payment of trustees. 

Discolsure: I am not a financial expert and it is highly recommended that you seek out a professional before making any financial decisions. Articles are informational and for educational purposes only.

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