The bankruptcy laws determine how bankruptcy trustees get paid for overseeing a bankruptcy case. In this article, you'll learn how a bankruptcy trustee's compensation differs depending on whether you're in Chapter 7 or Chapter 13 bankruptcy.
Learn more about trustee duties, powers, and the bankruptcy trustee.
In a Chapter 7 case, the trustee has two potential income sources.
The trustee receives no administrative fee if the court waives the filing fee because the filer's income meets fee waiver guidelines.
In addition to the standard $60 fee, the trustee also receives a commission on the money collected if the trustee sells assets and makes payments to creditors. You don't pay the Chapter 7 trustee's commissions. It's deducted from the sales proceeds.
The amount of the trustee's commission depends on the funds disbursed to interested parties (professionals and creditors). The sliding scale is as follows:
The trustee must apply for compensation with the bankruptcy court to receive payment. All creditors and interested parties receive notice of the amounts requested. The court holds a hearing on any objections filed, reviews the trustee's fee application, and awards a reasonable fee.
Bankruptcy trustees usually receive the maximum allowed. However, the bankruptcy court might award a lesser fee if the commission is large and required little work or if the trustee's office unreasonably delayed the estate administration.
The Chapter 7 trustee can also recover costs for expenses, such as professional accounting fees. Again, the trustee files a fee application with the bankruptcy court requesting reimbursement costs.
Most Chapter 13 trustees are "standing trustees," meaning that serving as a Chapter 13 trustee comprises all or a large part of their business. With few exceptions, all Chapter 13 cases filed in the district are assigned to these standing trustees.
The compensation to standing trustees is part of the plan payment you make every month under Chapter 13. The compensation varies by trustee, and although the trustee doesn't need to obtain a court order before receiving payment, oversight for the fee exists.
Under bankruptcy law, 10% is the maximum plan percentage a Chapter 13 trustee can be compensated. The trustee must use these fees for costs incurred in the case and for running the trustee's office.
The yearly salary of the Chapter 13 trustee is limited by law, and the trustee must file operating budgets with the Office of the United States Trustee for compliance review. These budgets include the costs of operating the trustee's office, and employee salaries, including professional salaries for attorneys and accountants. Once a budget is approved, the trustee can collect up to 10% from the plan payments.
Did you know Nolo has made the law easy for over fifty years? It's true—and we want to ensure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!
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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.
Updated March 24, 2023