How Do Bankruptcy Trustees Get Paid in New York?

A trustee in bankruptcy is an entity or individual who is tasked with administering a bankruptcy estate. The bankruptcy laws specify the maximum compensation allowed and the method of payment for bankruptcy trustees. The methods, amounts, and sources of compensation differ depending on whether Chapter 7 or 13 bankruptcy is declared.

Chapter 7 Cases

In Chapter 7 bankruptcy cases, trustees are paid in one of the two following ways:

• Administrative Case Fee – Chapter 7 bankruptcy trustees typically receive a $60 administrative fee. However, in cases in which the filing fee is waived, the trustee receives no fee.
• Commission – In cases in which the trustee collects assets of the debtor and makes payments to creditors, the trustee is paid a commission based on the amount collected. This commission is based on the amount paid to creditors by the trustee. These funds are generated via the sale of nonexempt assets or through recovery amounts collected by the trustee through the filing of lawsuits. The commission earned by the trustee is based on the following scale:

1. 25% of the first $5,000 distributed
2. 10% of any amount of money between $5,001 and $50,000
3. 5% of any amount of money between $50,001 and $1,000,000
4. 3% of all amounts of money in excess of $1,000,000

Chapter 13 Cases

The majority of Chapter 13 trustees are known as “standing trustees,” which means that employment as a Chapter 13 bankruptcy trustee constitutes all or most of their business. Most Chapter 13 bankruptcy cases are assigned to Chapter 13 standing trustees.

In Chapter 13 cases, debtors typically enter into payment plans to begin paying back their creditors. Chapter 13 payment plans specify the amount that each creditor will get paid, the payment period, the value of the debtor’s property, and other related issues. It is from this payment plan that Chapter 13 trustees are compensated, and the compensation received varies by trustee.

Under federal bankruptcy laws, the maximum percentage of a payment plan that may be used for Chapter 13 compensation is 10%. This percentage includes case costs, the trustee’s overhead costs, and the costs of compensating those hired by the trustee. A Chapter 13 trustee’s yearly salary is limited to the federal government Executive V level employee rate (plus the cost of employment benefits). The current Executive V level federal employee compensation rate is approximately $145,000.

Bankruptcy is a complicated topic, and the failure to file properly can have devastating financial consequences. Therefore, if you are considering filing for Chapter 7 or 13 bankruptcy in New York, please contact an attorney to discuss your situation. An experienced New York Chapter 7 or Chapter 13 bankruptcy attorney will keep you apprised of your rights while ensuring that you understand all of your debt relief options. Please contact us for a free consultation at (518) 462-5601.