How do Trustees Make Any Money?

[Moneypenny]

This is a nerves-type question, but it seems like trustees have all the power in the world, they can cite "totality of circumstances" which is vague to deny a chapter 7. Why wouldn't they? Why would they approve my chapter 7, and especially accept my expenses, when they could make some money in their own bank account from it? If they did it to a lot of people they would be rich. What interest do they have in my chapter 7 if they cant make any money off it?

This question especially concerns sched j expenses, since theoretically it is possible that people could survive on less than what they claim.

How does a trustee decide that an expense is reasonable, and why would they do so, since every time they do so they are losing money?

thanks,

MMP

[newbie2]

Think about it this way: Trustees do not have enough time (or staff members) to pick apart each and every filing looking for "totality" cases. They have a nice feel for what expenses are based upon family size, and if someone doesn't fall out of the "normal" range they don't bother.

If they argued on each and every filing just to try and pad their pockets they probably also wouldn't have their jobs long.

I know it's easy for me to say, but please don't worry so much that you'll make yourself sick.

[frogger]

A trustee makes a small fee for each case, but really makes the money when they find some assets to sell. That's when they turn into a commissioned salesman.

[catleg]

Trustees get a fee of $60 per case handled, plus a percentage of any assets uncovered. I guess after a while you develop a nose for which ones to go after, the fee doesn't allow them to dig very much or they'd fail at the trustee business.

[DeadManCrawling]

60 bucks per case is pretty good, at least from the 341 perspective.

My trustee had an assistant she chatted with between 341's. I overheard them talking about the morning's business. They were slowed by one case, but prior to that, had been averaging 14 cases per hour. 60 x 14 = 840/hour. Not bad at all.

They do put in more work than just the 341, though, so I am not sure how it really adds up.

When they find a case with assets, and particularly, high dollar assets, their earnings can skyrocket, but there is more work involved.

All in all, being a trustee would be a good gig for filling unbooked hours, or for a lawyer who doesn't much care for advertising and operating an independent office. Some districts do not have enough cases for trustees to work full time though. Others, like Florida Middle, where we are, are so busy they employ a dozen or more trustees.

[BCA2009]

From the way I understand it the Trustee has no real incentive to kick you out of a Chap 7. They get money if they find assets, but they don't get money for kicking you out of a seven. So unless something obvious shows up in your case, it is easier to let the no asset case run thru, than to do any work to try and get it dismissed.

[Mensa1]

60 bucks per case is pretty good, at least from the 341 perspective.

My trustee had an assistant she chatted with between 341's. I overheard them talking about the morning's business. They were slowed by one case, but prior to that, had been averaging 14 cases per hour. 60 x 14 = 840/hour. Not bad at all.

They do put in more work than just the 341, though, so I am not sure how it really adds up.

When they find a case with assets, and particularly, high dollar assets, their earnings can skyrocket, but there is more work involved.

All in all, being a trustee would be a good gig for filling unbooked hours, or for a lawyer who doesn't much care for advertising and operating an independent office. Some districts do not have enough cases for trustees to work full time though. Others, like Florida Middle, where we are, are so busy they employ a dozen or more trustees.

As stated, there are more hours than just the 341 time spent... All the data must be analyzed in advance, communication with attys to request info that was in error or omitted. TT's not doubt have clerical type workers to input data and the TT must reveiw the summary of completed work, prior to the 341.

The 60 bucks per case is likely a break even point for time spent. When they get the occassional large asset case these can pay fairly well, as TT gets 10% of assets found. I recently sat in on some 341's and then followed the problematic cases after the cr meeting to see how they were handled. This one particular case was a no asset case, but was a joke how the debtor was attempting to handle the 341. The meeting was rescheduled and since then the TT has converted it to an asset case and is now reporting about 3 mil in assets, of course some are encumbered, but not all. This gentleman is a farmer, with land and equipment... but when it all sorts out this TT may make a handsome sum from Farmer Joe when completed. It will be interesting to see if there is any disciplinary action against him; (potential of criminal charges maybe).

[Dst1]

Trustees get a fee of $60 per case handled, plus a percentage of any assets uncovered. I guess after a while you develop a nose for which ones to go after, the fee doesn't allow them to dig very much or they'd fail at the trustee business.

This made me laugh. Can you imagine the scene. A Trustee walks into bankruptcy court and when asked what they do for a living by the *other* trustee they say, "I failed at the Trustee business."

[logansdad]

lol

[Dst1]

As stated, there are more hours than just the 341 time spent... All the data must be analyzed in advance, communication with attys to request info that was in error or omitted. TT's not doubt have clerical type workers to input data and the TT must reveiw the summary of completed work, prior to the 341.

The 60 bucks per case is likely a break even point for time spent.

Typical billable hours/year are 2000. That would mean an income of $120,000 per year if they had 2000 cases and spent an hour on each case. Even two hours for 1000 cases would still be $60K a year + commissions. It's not outstanding, but then I know lawyers in the public sector who come out of law school making 35k a year. So it's not bad money either.

[JackBondLove]

I am curious - for a no asset case, if a discharge would get denied, would the trustee be able to get any money from that? For example, if someone had $80K in debt, but $10K of that debt was not discharged, would the trustee be able to get 10% of that $10K whenever that debt would be paid off? It would seem to be a very difficult task to do that.

[Mensa1]

Typical billable hours/year are 2000. That would mean an income of $120,000 per year if they had 2000 cases and spent an hour on each case. Even two hours for 1000 cases would still be $60K a year + commissions. It's not outstanding, but then I know lawyers in the public sector who come out of law school making 35k a year. So it's not bad money either.

This is more of what I have seen with TT's. They have cases one or two days per month. so lets go with the one day per mo scenario... about 32 cases all crammed in one 5 hr period. So the base fee at 60 bucks is 1920, or 23K annually. If that were it, then no one would ever be a TT. So lets say that 6% of those cases turn out to be asset cases, then there is the commission of 10% on the assets collected. I'm sure there is an avg there, but wouldn't know what it might be.

Suffice it to say that the TT must make $$$ or they wouldn't deal with the hassle. I have sat in on many 341's and it reminds of the lady at the drivers license renewal place; NEXT. I can't imagine doing that as an Atty, but obviously they do.

My guess is one day per month cases for TT must net them 50-60K on avg. It might pay the overhead on their law offc. But that is a pure guess.

[SleepWellNow]

It's my understanding, not only do Trustees collect a percentage of the assets collected for the bankruptcy estate, they can also bill for hours worked on the case while collecting the assets. This can add up to quite a few hours, especially when real property is involved. The Trustee on my friend's case tried to take over a Short Sale that was already in process. I'm sure he was seeing $$$ signs there!

[HHM]

Also, no one has mentioned yet, but chapter 7 trustees are actually capped at how much they can earn. I believe the figure is $175,000.

It is a somewhat time intensive job since the "trustee" is actually required to attend the 341. Most everything else can be handled by an assistant, but the reports and background work must still done. Most lawyers that are also trustees see the money from the trustee position as a way to pay for their firms overhead. Also, regarding charging expenses, that is only if they actually get money, so there is still risk for the trustee if they file an objection and it is refused by the court. (granted, many attorneys who represent trustees work on contingency)

Also, good attorneys understand the time constraints. This is why good BK attorneys will FORCE the trustee to go hearings if the trustee wants to challenge something. How likely is the trustee to invest the time challenging a $2,000 valuation discrepancy when the most the trustee stands to gain is $300.

[Mensa1]

HHM: I didn't realize that the TT was capped on income. Definitely a good thing to elimninate "head hunting TT's". Also the info on fees; great to know. Very informative info. Thanks.