Written by Craig D. Robins, Esq.Anyone filing bankruptcy will wonder, “how does a bankruptcy trustee get compensated for the work that he does,” and “who pays the trustee.”
Chapter 7 bankruptcy trustees are compensated in several ways.
First, they receive a portion of the Chapter 7 filing fee that is paid to the court. The filing fee is $299. The trustee receives $60 of that. Most cases are “no-asset” cases, meaning that the trustee will not seek to liquidate any assets. In those cases, the only compensation the trustee will receive will be the $60.
In addition, if the bankruptcy trustee does liquidate an asset in the bankruptcy proceeding, the trustee will receive a “trustee commission” based on a sliding scale statutory formula which is set forth in Bankruptcy Code section 326. The commission compensation is based on how much income the trustee brings into the bankruptcy estate.
According to the statutory bankruptcy commission formula, the Chapter 7 trustee will receive:
25% of the first $5,000;
10% of the next $45,000;
5% of the next $950,000; and
3% of the balance.
10% of the next $45,000;
5% of the next $950,000; and
3% of the balance.
Finally, the trustee is entitled to be paid for any legal services that he performs in order to collect and liquidate assets. Some trustees will hire other law firms to do this work, whereas other trustees will basically hire themselves.
A trustee cannot be paid a commission or legal fees unless he makes an application to the court and receives approval from the bankruptcy judge. Commissions and trustee legal fees are paid out of the funds raised by the trustee for the bankruptcy estate.
