When you file for bankruptcy relief, the court appoints a bankruptcy trustee to review your paperwork and oversee your bankruptcy. The trustee is entitled to compensation for administering your case. But how the trustee gets paid depends on whether you filed for Chapter 7 or Chapter 13 bankruptcy.
To learn more about what the bankruptcy trustee does, see our topic area on The Bankruptcy Trustee.
How Does a Chapter 7 Bankruptcy Trustee Get Paid?
In Chapter 7 bankruptcy, the amount of compensation the trustee receives depends on whether or not you have nonexempt property that the trustee can use to pay back your creditors.
In order to administer your bankruptcy, the Chapter 7 trustee must:
- review your bankruptcy paperwork
- verify your supporting documents
- conduct the meeting of creditors, and
- determine whether you have any assets that should be sold to pay back your creditors.
Each Chapter 7 trustee receives an administrative fee of $60 to oversee your case. This fee comes out of the filing fees you pay to the court when you file your case. If you qualify for a filing fee waiver, the trustee will not receive an administrative fee.
If you don’t have any nonexempt property that can be administered in your case, the $60 administrative fee is the only compensation the trustee receives. But if you own nonexempt assets, the trustee will receive an additional commission for administering your property for the benefit of the bankruptcy estate (discussed below).
If the trustee determines that you have nonexempt property that can be administered in your bankruptcy, he or she will receive a commission based on the amount disbursed to interested parties (such as creditors).
In general, the trustee is compensated on a sliding scale and will receive up to:
- 25% of the first $5,000 distributed
- 10% of any amount between $5,001 and $50,000
- 5% of any amount between $50,001 and $1,000,000, and
- 3% of all amounts in excess of $1,000,000.
Keep in mind that this is the maximum compensation allowed for a Chapter 7 trustee. But the trustee’s fee must also be reasonable. When the trustee wants to get paid, he or she must file an application with the court and provide notice to all interested parties.
In most cases, the trustee will receive the maximum commission allowed by law. But if a party objects or the court believes that the requested fees are not reasonable, the trustee’s fees may be reduced.
For more information on how to protect your property in bankruptcy, see our topic area on Your Property in Chapter 7 Bankruptcy.
How Does a Chapter 13 Bankruptcy Trustee Get Paid?
Unlike in Chapter 7 bankruptcy, the trustee in a Chapter 13 case doesn’t sell your nonexempt property to pay your creditors. In exchange for keeping all of your property, you propose a plan to pay back a portion of your debts through your bankruptcy.
The Chapter 13 trustee receives a percentage of your monthly plan payments to administer your case and cover the costs associated with running his or her office. The exact percentage will depend on your specific trustee. But the maximum that a Chapter 13 trustee can collect is 10% of your plan payments.
In addition, the Attorney General limits the Chapter 13 trustee’s yearly salary to the amount paid to federal employees at level V of the Executive Schedule (plus the value of employment benefits).
To learn more about how Chapter 13 plans work, see The Chapter 13 Repayment Plan.