How Do Bankruptcy Trustees Get Paid

Bankruptcy clients sometimes ask how much money a bankruptcy trustee gets paid and how are they paid. I read a good summary of Trustee compensation in a blog post by California attorney Michael Doan on the Bankruptcy Law Network: CHAPTER 7 BANKRUPTCY TRUSTEE FEES : Bankruptcy Law Network. Bankruptcy trustees are paid a small flat fee per Chapter 7 bankruptcy case plus a percentage of assets recovered, if any. Essentially, the Trustee is paid on commission to recover your money.

Mr. Doan describes the Trustee's incentive  as follows:

"The trustee’s commission percentage of what is sold is 25% of the first $5,000, plus 10% of any amount over $5,000, but less than $50,000, plus 5% of any amount over $50,000 and under $1,000,000, and 3% of any amount above $1,000,000. Of course, most Chapter 7 filers don’t have nonexempt property, so there is nothing for the trustee to sell, so she must settle for a small part of the filing fee."

Most trustees make very little money on the average case, but once in a while, they are assigned a large bankruptcy with substantial non-exempt assets. However, the new bankruptcy law places more work and responsibility on bankruptcy trustees. Being a trustee is not an easy job and in most cases not a high paying job.