All those who file for a chapter 7 bankruptcy are assigned a trustee. This person is often a judge, but they can also be an attorney with bankruptcy experience. Most people who file bankruptcy have limited interactions with the trustee, but it pays to understand more about how this position figures in your bankruptcy and how they are compensated. Read on for a better understanding of who might be profiting from your bankruptcy.
Two encounters with your trustee
In most cases, it will be your trustee that presides over your creditor's meeting. This "meeting" is as close as it comes to an actual court appearance for bankruptcy filers, and there you will be called to swear that your bankruptcy paperwork is an accurate accounting of your financial status. While it is referred to as a creditor's meeting, you should know that they seldom appear for most consumer bankruptcy filings and your bankruptcy attorney will prepare you in advance if any of your creditors are expected that day.
The only other time most filers ever have any contact with their trustee is at the home inspection. Not all filers will have a home inspection, however. If you do have one, in some cases the trustee will send an assistant to view, list and photograph your property during this visit, which is scheduled far in advance. Since a chapter 7 bankruptcy calls for you to "declare" that you cannot pay your bills, the inspection is meant to assure the bankruptcy court that you are not withholding property or fudging on the value of it. Property can be seized and sold to help pay your creditors, so you need to take care to be honest when you fill out your paperwork. Some of your property is protected by exemptions, which depreciates the value of your property and could allow you to keep it. No property is taken at the time of the visit; it will be forfeited at a future date.
The trustee's compensation
You may not consider how the trustee gets paid any of your business, but you could not be more wrong. The trustee is actually compensated based on how much of your property can be seized and sold to pay the creditors. The pay is a percentage of property seized, for example:
- 25% of the first $5,000.00
- 10% of $5,000.00 - $50,000.00
- 5% of $50,000.00 - $1,000,000.00
- Even if no property is ever seized, the trustee is paid a flat $60.00 fee for each bankruptcy.
Talk with a bankruptcy attorney, such as Jeffrey S. Arnold, Attorney at Law, P.C., to learn more about the role the trustee takes in your bankruptcy.
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