Chapter 7 Trustees are compensated in two ways. First, they receive a flat $60 fee per case. Second, in the event there are assets to liquidate, the trustee will receive "reasonable" compensation in accordance with 11 U.S.C. §§ 326(a) and 330(a).
Reasonable Compensation for Trustee's Services
Section 326(a) provides that a court "may allow" reasonable compensation for the trustee's services, and that such compensation is "not to exceed" certain percentages of "all moneys disbursed or turned over in the case by the trustee." The limits are 25% of the first $5,000 disbursed or turned over, 10% of any amount over $5,000 and up to $50,000, 5% of any amount over $50,000 and up to $1 million, and 3% of any amount over $1 million. It is generally understood that reasonable compensation in asset cases is intended to serve, in part, as compensation for the trustee's work in no asset cases.
Although the term reasonable is used here, it is generally held that compensation in accordance with section 326(a) is reasonable absent extraordinary circumstances.
Chapter 7 Bankruptcy Trustee's Retention of Professionals
What is not often discussed is the compensation the trustee receives if he or she retains his or her own law firm to assist with the administration of the case. Oftentimes, the legal fees paid by the trustee to his or her own law firm will exceed the amount paid to the trustee as compensation.