How Does the Bankruptcy Trustee Get Paid?

The bankruptcy trustee oversees a filer's case and receives compensation for doing the job. But it's fair to say that the trustee's interests align more closely with bankruptcy creditors than the debtor's, which will become clear once you understand bankruptcy trustees' compensation consists of the following:

• a percentage of the property sales proceeds dispersed to Chapter 7 creditors, and
• up to 10% of the monthly amount paid to Chapter 13 creditors.

As you prepare for the creditors' meeting, review the questions asked in a 341 meeting. Then check out 341 Meeting of Creditors Explained—it will help guide you through the creditors' meeting process.

How Much Do Bankruptcy Trustees Make?

It will depend on the bankruptcy chapter filed. For instance, in Chapter 7, a bankruptcy trustee who sells a large amount of the debtor's property to benefit creditors will earn significantly more than a trustee who sells little or no property.

A Chapter 13 trustee's payday increases when the debtor pays a more significant monthly Chapter 13 plan payment. More details about Chapter 7 trustee payments and commission and Chapter 13 trustee compensation follow.

How Does a Chapter 7 Bankruptcy Trustee Get Paid?

A Chapter 7 trustee receives $60 for each Chapter 7 case assigned to them, which isn't much considering the trustee is responsible for doing all of these things:

• reviewing bankruptcy paperwork
• verifying supporting documents
• conducting the meeting of creditors, and
• identifying assets to sell for creditors.

In addition, trustees must administer some matters for free because the $60 payment comes from the filing fee the debtor pays at the start of the case. If the filer qualifies for a fee waiver, the trustee receives nothing.

The Chapter 7 Bankruptcy Trustee's Commission

Receiving a portion of your filing fee isn't the only way a trustee can make money. The trustee gets commissions on property sold for creditors, and the amount received can add up to a significant payday. Here's the payout chart:

• 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 over $1,000,000.

This amount is the maximum compensation allowed and must be approved by the bankruptcy court. Also, if the trustee's commission seems too generous, for instance, the trustee didn't put in much work, a party can ask the court to reduce the trustee's fees.

The trustee can't sell all of the debtor's property. The trustee is limited to selling assets not protected by bankruptcy exemptions. You can determine whether your property is at risk by learning about property in Chapter 7 and reviewing the property covered in your state.

How Do Chapter 13 Bankruptcy Trustee Payments Work?

In a Chapter 13 case, the trustee doesn't sell property to pay creditors. The Chapter 13 trustee receives a percentage of the debtor's monthly plan payments. The exact rate depends on the trustee, but the maximum that a Chapter 13 trustee can collect is ten percent of the plan payments.

Protections are in place to prevent Chapter 13 trustees from receiving unreasonably large payments. The Attorney General limits the Chapter 13 trustee's yearly salary to the amount paid to certain federal employees. To learn more about how Chapter 13 plans work, see The Chapter 13 Repayment Plan.

Navigating Your Bankruptcy Case

Bankruptcy is essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. We want to help.

Below is the bankruptcy form for this topic and other resources we think you'll enjoy. For more easy-to-understand articles, go to TheBankruptcySite.

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.