Trustee--I Don't Understand This

[epiphany]

It seems to me that it ought to be illegal for trustees to collect any type of commission from filers.

Would it not stand to reason that the trustees interest in the outcome of a BK filer's case could substantially profit that trustee...and that the trustee, having that sole discretion, would naturally be tempted to disfavor the filer if the trustee feels he can make a profit?

How is this not a conflict of interest? I don't get it.

ep

[FreshLikeADaisy]

Epiphany, that's just the point that the success of the system rests on: the greed involved favors the govt, STRONGLY encourages trustees to look for all possible assets, and discourages a great deal of fraud. On the other side of the coin, if an asset is seized unlawfully and without legal basis, the trustee can be held accountable and forced to back off; the debtor can also sue and even appeal the decisions up the line.

So yeah, it's greed and a conflict of interest, but that's actually the juice that keeps it running, and they set it up just that way. I'm not sure I entirely approve, but as long as the debtor has the right and the ability to easily dispute trustee decisions it does remain more or less fair, so...

Feel free to disagree, of course, but those are my thoughts...

[epiphany]

Epiphany, that's just the point that the success of the system rests on: the greed involved favors the govt, STRONGLY encourages trustees to look for all possible assets, and discourages a great deal of fraud. On the other side of the coin, if an asset is seized unlawfully and without legal basis, the trustee can be held accountable and forced to back off; the debtor can also sue and even appeal the decisions up the line.

So yeah, it's greed and a conflict of interest, but that's actually the juice that keeps it running, and they set it up just that way. I'm not sure I entirely approve, but as long as the debtor has the right and the ability to easily dispute trustee decisions it does remain more or less fair, so...

Feel free to disagree, of course, but those are my thoughts...

Ha, sweet FLAD, you are already anticipating my disagreement. But I don't know enough yet to disagree with you. Perhaps when I learn more, I will come back and really let you have it!

I get it. I do wonder though if anyone has ever challenged this very law in court. It just doesn't seem constitutional. Was this also the case before the new law in 2005?

ep

[Flamingo]

It seems to me that it ought to be illegal for trustees to collect any type of commission from filers.

Would it not stand to reason that the trustees interest in the outcome of a BK filer's case could substantially profit that trustee...and that the trustee, having that sole discretion, would naturally be tempted to disfavor the filer if the trustee feels he can make a profit?

How is this not a conflict of interest? I don't get it.

ep

Just as with anything else in state and government, there are fees associated with everything. Think about the taxes paid into school systems in this country which are to cover all costs for the public school systems (salaries, books, supplies, etc.) yet parents constantly receive letters from teachers to send in supplies that the school cannot pay for or get bombarded with fund raisers to pay for new computers in the school that should have been covered under taxes paid. Do you think the federal government should pay for one filing bankruptcy? Do you think taxpayers money should pay for Mr. & Mrs. Jones bankruptcy and trustee's services? Or do you feel one should be responsible for their own bankruptcy as it now stands and pay for services rendered?

[epiphany]

Just as with anything else in state and government, there are fees associated with everything. Think about the taxes paid into school systems in this country which are to cover all costs for the public school systems (salaries, books, supplies, etc.) yet parents constantly receive letters from teachers to send in supplies that the school cannot pay for or get bombarded with fund raisers to pay for new computers in the school that should have been covered under taxes paid. Do you think the federal government should pay for one filing bankruptcy? Do you think taxpayers money should pay for Mr. & Mrs. Jones bankruptcy and trustee's services? Or do you feel one should be responsible for their own bankruptcy as it now stands and pay for services rendered?

Did you actually read this thread? Perhaps I didn't make myself clear. This has nothing to do with fees or taxes or whether we are responsible for our own bankruptcy fees (of course we are).

My question was about the commission that is going into the trustee's pocket from a BK. This money is not going to the government or the community. It is going to the individual trustee and into his bank account.

I had no idea before today that trustees were not paid on a salary but rather 60 dollars per case plus the commission of whatever they can recover from filers. I fail to see how that can possibly be fair and just when there is monetary incentive involved. I imagine that some trustees are making more than a tidy little profit by screwing both me and you.

But, it's a living for them I guess....gotta be a nice one.

ep

[Flamingo]

Did you actually read this thread? Perhaps I didn't make myself clear. This has nothing to do with fees or taxes or whether we are responsible for our own bankruptcy fees (of course we are).

My question was about the commission that is going into the trustee's pocket from a BK. This money is not going to the government or the community. It is going to the individual trustee and into his bank account.

I had no idea before today that trustees were not paid on a salary but rather 60 dollars per case plus the commission of whatever they can recover from filers. I fail to see how that can possibly be fair and just when there is monetary incentive involved. I imagine that some trustees are making more than a tidy little profit by screwing both me and you.

But, it's a living for them I guess....gotta be a nice one.

ep

I was just making a "comparison" of how we have to pay fees, etc. in addition to taxes for state/federal programs, salaries, etc., etc. to your questioning as to the legality of Trustee's fees in a bankruptcy. In my school/tax reference, we pay taxes and fees for school districts but those taxes never seem to cover everything; we always receive letters/requests to donate things to the school that should be covered by those taxes. If taxes, etc. had to be raised to cover the Trustee's costs, commissions, fees and staff and bankruptcy filings costs (federal court), we all would be paying the expenses for someone filing bankruptcy. I am thinking of the uproar that would create in society. That's all I am saying - maybe I didn't word it very well rushing out the door early this a.m. but I think you can see the lines I am basing that on. I could probably word it much better but I am typing this quickly at work and, again, I think you and other readers will see what I am getting at....

I don't think the trustee is screwing anyone when you think about handling thousands of BKs, including long-term Chapter 13's, and all the record keeping, etc. involved. It's a huge process. It's based on a service he is performing for the debtor to get the debtor back on track and handle all the creditors involved.

[Minnymouth]

You don't want to get me started on the "good, bad, and ugly" of the TRUSTEES in this world.............

Some are very decitfull, and even downright crooked when you start following some of their cases.

Yes, they are "out for the $$$$$", that's how they make their good living!!!
Commmissions............... and money they can make under the table!!!

What about the "deals" they make where a home is supposed to be auctioned....AND THEN NEVER IS..... but is sold to an insider (or family member of the Trustee or Auctioneer) at a very low price!!!

Follow up on some court cases and you will NOTICE a lot of things that go on!!!

Believe me, Trustee's can be "sneaky" too!!! Just like attorneys!!

[woeisme]

Maybe my opinion is just from the perspective of the trustee that I have (who is very fair and has one of the highest percentages of successful CH 13s in the country) but it seems to me that trustees actually would benefit, at least in the case of CH 13s, from being fair and reasonable. Yes, they want to make sure no assets are hidden and the commission provides incentive to do their due diligence on the behalf of the creditors, but also that commission in a CH 13 case should make them want to work with filers to insure that they complete their plan successfully. If a CH 13 trustee gets too greedy, forcing a payment beyond the capabilities of the filer, then the filer drops out of the CH 13 process after a year or so of struggling to make the unreasonable payments. Whereas the CH 13 trustee would get much more money over the life of a successful CH 13 than they would an unsuccessful CH 13 where the filers bailed out early. So I think a smart CH 13 trustee wouldn't screw a filer since it would also screw the trustee out of the full 60 months worth of commissions when the filer gives up and drops out of the CH 13 plan. (My trustee charges a very minimal 2.7% fee, by the way, so he must make his money in volume and successful plan completions.)

Of course a CH 7 is a whole different story, there is no reason for a trustee not to try to go after every asset there, which is why the checks and balances from the BK Judge is needed.

[Minnymouth]

There ARE NOT CHECKS AND BALANCES with the BK Judge when the filer's Attorney and Trustee BOTH are less than honorable.....

A filer cannot hire another attorney during a Chapter 7 (no other attorney will jump in and take the case), nor can they file petitions on their own with the Court if they feel their attorney's or Trustee's actions are questionable.

If your attorney and Trustee can keep the filer out of Court, then the filer has no re-course and the attorney and Trustee can pretty much do as they please within reason without the Judge questioning it.

Judges aren't interested in "details" of a bankrutpcy, only final results to close the case. If a trustee or attorney does business with an "insider" or their own family members, the Judge normally never knows this. All the Judge knows is that the Trustee petitioned to have the property sold and the Judge grants it, then signs off on it AFTER it's done. How the property was sold, who bought it, what they paid for it, or why it was handled the way it was, means very little to the Judge. Only that his court order was carried out!!

Example: A home/land worth $65,000 was to be AUCTIONED OFF. Never auctioned off...... sold to a relative of the Auctioneer in a private sale for $16,000???. (That's what the final court papers said $16,000). SO WHAT HAPPENED HERE????? Insider sale to a family member of the Auctioneer??? Did it benefit the creditors it was supposed to???? NO, they lost money in the transaction....... The home would have brought at least $50-$55K at auction.

So who took the loss here, THE CREDITORS?????

Nothing "sneaky" going on here, huh!!!!!!

[woeisme]

That particular case doesn't sound within reason to me, and is something that should be brought up with the Attorney General's office Minnymouse.

As there are bad apples that abuse the BK system on the debtors side, I am sure there are bad apples on the attorney/trustee/judges side as well. No system is free from abuse, and are always people out there trying to scam the system. But I think the OP's original post was about how it is that commissions to trustees are allowed. And I'll stand by my original statement that while I think that is a problem for CH 7 filers, ripe with potential for abuse there, that I don't think it is in the trustees best interest to jack up CH 13 payments and go on an asset-grabbing raid there because in the long run they won't make as much money.

Every institution where a lot of power is given over people's lives is tricky. Like an immigration official who can extort financial or sexual favors under threat of deportation, to a boss who is abusive to employees but brings in so much money for the corp. that they ignore his behavior, to the trustee who oversees BKs. All are hard to fight against, and often people lose big-time. But sometimes when these things are exposed to the light of day, the perps face justice. Right now in Ohio our Attorney General is facing a possible impeachment, so even people with huge amounts of power can be made to be held accountable for their actions. Unfortunately, more often than not though, a lot of people get stomped on before things finally change.

[FreshLikeADaisy]

There ARE NOT CHECKS AND BALANCES with the BK Judge when the filer's Attorney and Trustee BOTH are less than honorable.....

Very, very unfortunate and very, very true. Because the only recourse you, a debtor, would have is a) the court, and b) the U.S.Trustee program (which might possibly get the trustee fired, but you'd never see your property again).

It's bad enough you got a dishonest sleazebag trustee... but when you got the matching attorney it was all over. All you could have done was go pro se in the middle of your case, and that's not much of a win because you would still have had to deal with the process itself AND the dishonest scum-suckin' dirtbag trustee, if not the useless attorney.

Like I said, I don't know that I approve of the system, but I understand why they set it up that way: if anyone gets screwed, it's the debtor or the creditor, not the trustee or the courts.

All I can say is, there's a real special place in hell for people who exploit the helpless.

[HHM]

Minny's situation not withstanding, I don't think there is a major problem with trustees earning commission. Plus, I do think their should be some incentive for the trustee to carry out their task of acting on behalf of the creditors. After all, you need to realize that the trustee stands in place of YOUR CREDITORS. The trustees really have no duty to the debtor. 98% of the time, the system works as it is supposed too. And the debtor really does have recourse to the courts. It really is not that difficult to file a motion disputing something the trustee is trying to do.

[PoorGrammyinBK7]

Our attorney said the Chapter 13 trustees are paid differently than the Chapter 7 ones. Ch 7 trustees have more incentive to find assets and seize them, because they get a hefty %. Forgot how much it was.

[kornellred]

Standing trustees are limited to earning $171,000 per year (give or take a few hundred). The exact figure is posted at the US Trustee's website. I am uncertain as to whether that figure represents total income from all sources, or if it applies only to their fees and commissions as a trustee. I can't imagine a successful CPA or attorney wanting to get involved with being a trustee if their income approximates that 171K figure to begin with.

They work awfully hard at a job that requires intense discipline. A trustee in Wyoming is not going to earn as much as his/her counterpart in the big BK states, that's for sure.

[itneverends]

....It is going to the individual trustee and into his bank account.

I had no idea before today that trustees were not paid on a salary but rather 60 dollars per case plus the commission of whatever they can recover from filers. I fail to see how that can possibly be fair and just when there is monetary incentive involved. I imagine that some trustees are making more than a tidy little profit by screwing both me and you.

But, it's a living for them I guess....gotta be a nice one.

ep

You are missing a rather large part of the equation here. The money collected does not go straight into the trustee's personal bank account. The fees have to pay the trustee's cost to execute the BK's. This includes an entire office staff and staff lawyers. On his site, my trustee has 20+ people listed on his "Who does What in my Office" sheet. He has to pay all those salaries, rent, computers; he even has an IT Manager.

I am sure they make a decent living, but they are not shoving all that money directly into their own accounts.

When I first went into this, I had the exact same reaction as you. But at least from a Ch 13 side, once you understand all that goes into administering these cases, it makes a little more sense.