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Scura, Wigfield, Heyer, Stevens & Cammarota Blog

How Chapter 7 Trustees Get Paid

[fa icon="clock-o"] January 24, 2018 [fa icon="user"] Christopher J. Balala [fa icon="folder-open'] Bankruptcy, Chapter 7

chapter 7 bankruptcy trustee money and gavelTrustees are people, sometimes attorneys, appointed or selected to oversee a bankruptcy case.  The bankruptcy trustee is responsible for administering the bankruptcy estate which consists of all of the debtor’s property and certain rights of the debtor.  A chapter 7 is a liquidation proceeding so the chapter 7 trustee is usually tasked with reviewing the debtor’s property, selling the property when possible (if the property is not exempt), distributing proceeds to creditors (after challenging any of their claims), and objecting to the debtor’s discharge (if applicable).  The Department of Justice oversees the functions of chapter 7 trustees.  Of course, this is not an exhaustive list of chapter 7 trustee responsibilities, but the question remains, how are they paid for all of this work?  

The Compensation of a Chapter 7 Trustee

The bankruptcy laws set out the compensation levels for bankruptcy trustees.  See, 11 U.S.C. §326.  Trustees receive a $60/per case administrative fee.  This is paid out of the court’s filing fee, that is paid when the case is initiated.  If the debtor moves to waive the filing fee through the court’s designated procedure, and the judge approves it, the trustee does not receive this base compensation. 

Once the trustee administers the case by reviewing the documents filed by, and provided by the debtor, the 341(a) Meeting of Creditors will occur.  The trustee will next determine whether the case has assets or not.  If the case is “no asset” then no further fee is paid to the trustee. 

If there are assets in the case and the trustee recovers monies that can pay creditors, he or she will receive a commission on what is distributed to creditors.  This distribution can be from liquidation of property of the bankruptcy estate, lawsuits, or some other monetary settlement.  The trustee must file a fee application in order to receive compensation.  All parties to the case are served with the fee application, and if approved by the court, the trustee will receive compensation as follows:

  • 25% of the first $5,000 disbursed to creditors,
  • 10% on the next $45,000,
  • 5% on the next $950,000, and  
  • 3% on anything over $1,000,000.

When the Trustee is also the Trustee’s Attorney

A chapter 7 trustee may act as an attorney or accountant for the bankruptcy estate if, upon court approval, the trustee can prove that it is the best interest of the estate.  See, 11 U.S.C. §327(d).  It is common practice for the trustee to retain themselves or their firm but they still must meet the standard set forth in §327 for retaining special counsel.  Compensation for both trustee and attorney/accountant work must be separately applied for before the court pursuant to 11 U.S.C. §328(b).    

Get Answers to Your Bankruptcy Questions

If you have questions regarding any chapter of bankruptcy and are seeking debtor or creditor representation, we may be able to help.  If you are unsure of your legal rights, please give us a call for a free consultation.  We have office locations in Wayne, Hoboken, Newark, and Hackensack.

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Whether you need to completely eliminate your debt through Chapter 7 bankruptcy, or need to reorganize your credit payments through Chapter 13 or Chapter 11, we are well qualified as a full-service bankruptcy law firm for people in these and other New Jersey counties: Passaic County, Hudson County, Essex County, Bergen County, Morris County, and Sussex County. Call us today at 973-870-0434 or toll free 888-412-5091.

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