Riverside Bankruptcy Chapter 7 Trustee Robert Whitmore
In the last post, I described the statutory scheme for the Limitation on Compensation of Trustee under 11 U.S.C. Section 326. I have been asked how the Limitation on Compensation of Trustee operates. Since Riverside Bankruptcy Chapter 7 Trustee Mr. Whitmore does the small asset cases, he is a good person to show how the process works.
Mr. Whitmore is the Trustee assigned to your case. In the petition, the debtor has a vehicle worth $10,000. Under the exemption schedule, the debtor can only exempt $5,100 and cannot use the “wildcard” to protect the rest of the equity since the “wildcard exemption” is being used to other pieces of property. Therefore, the auto has $4,900 in nonexempt equity. In other words, the auto is protected to a certain amount.
Mr. Whitmore now has a possible asset which he can sell to pay off a portion of the creditors in the bankruptcy estate.
If Trustee Whitmore sells the vehicle for $10,000 he would earn compensation in the following amount.
25% of the first $5000 which equals $1250
and then 10% of the next $5000 which equals $500
so for selling the $10,000 asset, the court would award the Trustee unto $1750.
In the above example, if the trustee sold the vehicle for $10,000, the trustee would then pay the debtor the $5100 in exemption and the creditors would divide $3150 less the cost for the trustee to sell the auto which may be as much as $2000. So potentially the creditors will divide up $1100!
The limitation on trustee compensation located at 11 U.S.C. 326 may assist you in negotiating with a trustee on an asset case. Take a look at the compensation schedule so that you can talk the same language as the trustee.