Who is the Trustee and how does the Trustee get paid?

When someone files for bankruptcy a trustee is appointed by the court to hold the debtor’s unexempt property in trust for the benefit of that debtor’s creditors. That property is then either liquidated at auction or repurchased by the debtor. Because there is a cost associated with the collection and liquidation of assets, the trustee will often give a small discount to the debtor, should the debtor wish to pay for or “buy back” the unexempt property. These buy backs should be thought of as a courtesy, as they are not a right of the debtor and as such the terms are between the debtor and trustee.

In a Chapter 7, the trustee’s pay is set forth by statute and begins as a set portion of the filing fee, say $60.00 of the $299.00. From there they get a graduated percentage of the property they liquidate for the benefit of the creditors. Those percentages are set forth in 11 USC 326(a) as follows:
25% of the first $5,000;
10% of the next $50,000;
5% of the next $1,000,000; and 3% of any monies in excess of $1,000,000.

In a Chapter 13, the trustees get paid a flat rate percentage of all the money they collect for creditors. This rate varies from state to state, but in Florida it is set at 10%, however it is actually calculated by dividing the total sum by 0.9 rather than multiplying by 0.01. As this percentage includes ANY payment to a creditor, including ongoing payments on home mortgages, it is hugely advantageous if we can allow a debtor to pay for their home outside their plan so as to avoid those ongoing charges.

If you’re considering your options in bankruptcy, and would like me to analyze your financial situation to see if bankruptcy relief is a good option for you, please contact me at 904-685-1200 and schedule a free consultation.