CHAPTER 7 BANKRUPTCY TRUSTEE FEES
By Michael Doan on Apr 13, 2008 in Bankruptcy Myths, Bankruptcy Practice and Procedure, California, Chapter 7 Bankruptcy, General Bankruptcy Information
So you did all that work to prepare your case and file for Chapter 7. Likewise, your attorney charged you $1000 to $5000 to help you get all the forms correct and represent you in the matter. So after about 20 to 30 hours later, there are now about 30 to 45 pages of documents filed with the Bankruptcy Court and an another 50 to 200 pages of additional supporting documentation sent to the Chapter 7 Trustee. That Trustee must get $2000 to review all your paperwork, hold the 341 hearing, analyze for 707b abuse, look for preferences, look for bankruptcy fraud, respond to you and your creditors, and monitor your case for the next 4 months, right? NOPE!
With the new bankruptcy laws under BAPCPA, the Trustee’s may actually be getting the short end of the stick! Actually, they get $60 per case. So how does an attorney billing out at $450 per hour who is also serving as a trustee process and monitor your case for $60?
Heck if I know? That’s why I would never be a trustee. At $450 per hour, a trustee would only spend 7.5 minutes per case. Heck, they cant even conduct the trustee hearing in that amount of time, let alone review all the documents. And to make matters worse, if you qualify for a fee waiver, wherein you get your $299 court filing fee waived, the trustee gets $0.00!
Ah, but there is one little area that adds more compensation to the trustee. ASSETS! That’s right! If the trustee can liquidate some of your assets, he gets a percentage of the funds received.
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.
To make it a little simpler, I like to look at anything over $100,000 as $8250 plus 10%. But that is assuming the Court will grant the entire percentage. Actually, these percentages are only the maximum amounts the trustee can receive, and they still must document their time and hourly rate.
So its not uncommon, at least down here in Southern California, where a Trustee sells real estate at $800,000 and is technically entitled to $78,250 in the sale, yet the Court will only allow $10,000.00. So what does all this mean? Well, a couple interesting facts can be deduced:
1) If there are no assets and you case is complex, you will have a very grumpy trustee.
2) It is impossible for any trustee to competently perform all their duties under the code for $60.00.
3) Trustees take the $60.00 cases as loss leaders.
4) 95% of the cases Trustee’s review have no assets to administer.
5) The 5% of cases with assets, supplies most the income to the trustee.
So to make a long story short, unless your case has assets, or some sort of abuse(ie recent load up of credit card debt or excess income) you can count on your case going quite smoothly so long as you have a competent attorney.
Written by Michael G. Doan.
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