How Do Trustees in Chapter 7 Get Paid?
It is the trustee’s job to administer your bankruptcy case. He’s the one who will try to figure out how much property you own, what can be sold, and how much to pay creditors. He challenges anything in the case he does not agree with, and he holds the all-important creditor meeting. So what’s in it for him?
Most Chapter 7 trustees actually don’t get paid very much. They get paid a flat fee, which comes from your bankruptcy filing fee, of $60. After that, what the trustee receives as compensation depends entirely on how much income the trustee can bring into your estate to pay creditors. There is a commission-based formula. Of the first $5,000 he liquidates, he will receive $1,000. After that, the percentage of recovery decreases as the amount of assets increase.
Most trustees rely on the few large bankruptcy cases to earn money. However, the vast majority of bankruptcy cases are “no asset”, which means there won’t be anything to use to pay creditors. For these cases, the trustee makes only $60. In addition to this commission-based salary, the trustee gets compensation for any legal services performed to collect assets.
Any fees that go to the bankruptcy trustee must be approved by the bankruptcy judge.
Stephen M. Trezza
