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When you file for bankruptcy you will be assigned an attorney known as a bankruptcy trustee that will stay with you throughout the entire process. This section will answer some commonly asked questions about the bankruptcy trustee.

Who assigns the bankruptcy trustee?

When you file for bankruptcy (either Chapter 7 or Chapter 13), the U.S. Trustee appoints a bankruptcy trustee to your case.

Is the trustee’s role the same throughout all bankruptcy?

The bankruptcy trustee has similar duties in both Chapter 7 and Chapter 13 filings, but there are some differences.

How do bankruptcy trustees get paid?

In a Chapter 7 bankruptcy the trustee is paid in two ways depending on whether there are assets to be sold.

▸ First, the trustee receives a small administration fee. This is paid from the filing fees you pay to the court clerk when you filed the case. The trustee receives no admin fee if the filing fee is waived.

▸ If there are no assets for the trustee to sell and the trustee doesn’t salvage any other money through tax refunds, lawsuits, or other actions, there is no further compensation paid to the trustee.

▸ If there are assets that the trustee has to sell during the bankruptcy and the trustee makes payments to lenders, the trustee also receives a commission on the funds collected based on the amount disbursed by the trustee. The commission is paid from the money collected from the sale of nonexempt property or the retrievals on lawsuits brought by the trustee. You do not make extra payments to cover the trustee’s commissions in a Chapter 7 bankruptcy.

▸ The Chapter 7 trustee can also retrieve costs from the estate. However, as with the fees, this can only happen after the trustee files a fee application and request for reimbursement of costs. It must be approved by the court after serving notice to all parties in the bankruptcy case.

In a Chapter 13 bankruptcy the trustee is commonly referred to as a “standing trustee”. The payment a standing trustee receives is their income and is paid out of your monthly repayment plan. The fee a Chapter 13 trustee is paid is controlled in three ways.

▸ Under bankruptcy law, 10% is the maximum percentage of any Chapter 13 monthly repayment plan. This includes cost acquired in the case, the cost of maintaining the trustee’s office, and the cost of any professionals the trustee hired.

▸ The amount of money used to pay the annual salary of the Chapter 13 trustee is limited to the amount set for a federal government employee being paid at Executive V level, plus the cost of benefits.

▸ The standing trustee must file proposed operating budgets with the Office of the U.S. Trustee. If approved, the budgets set the maximum costs and compensation that can be retrieved by the Chapter 13 trustee. The budget includes costs of operating the office of the trustee and employee salaries, including salaries for lawyers and accountants. Once a budget is accepted, the trustee has the ability to collect a percentage up to 10% to cover their salary and costs from the plan payments. The approved percentage fluctuates with the fluctuations in Chapter 13 filings and may change during the lifetime of your plan

Remember that bankruptcy trustees are there to make sure your lenders get paid. Be sure to contact a professional bankruptcy specialist for all of your legal questions, procedure inquiries and any other information you might require. A trustee isn’t required to answer legal questions, though they can offer advice. A consultation with a bankruptcy lawyer would be preferred over this option. Get your questions answered today.

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