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Trustee Fees & Obligations

It is my understanding that the fees a trustee will earn from administering a CP is based (as a percentage) on the total amount of settlement paid out to creditors in the proposal. It seems to me this would encourage the trustee to push for a larger settlement amount, so in essence they would be representing the creditors interest rather than mine. Am I missing something here?

Posted from: Alberta

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One Response to “Trustee Fees & Obligations”

Barton Goth – Goth & Company Inc. -Trustee in Bankruptcy said...

You are correct that the administration fees are based on a formula that is derived from the amount of money paid out to creditors within the consumer propsal. While I agree this appears to bias the trustee and there may be better metrics, as the process is legislated and the formula is written into the legislation, the trustee’s have no choice in how that fee is calculated. There is also the other side of the equation. If the trustee encourages you to put forward a settlement that is excessive, and that leaves you in a position where things are simply to tight and you cannot complete the proposal, well the trustee doesn’t collect his full fee. So there is some pressure the otherway as well.

Regardless, this makes it important that you deal with someone who is reputable and you have confidence in. If it helps, most trustee’s that I am know do not try to inflate the amount of the propsal in an effort to increase their fee, but I agree it is possible. What I would recommend, talk to a trustee. Ask what type of offer they would suggest, ask for the reasoning for that offer as opposed to something higher or lower. Often when you understand the reasoning for what is taking place it helps to alleviate concerns over a bias. Potentially look at posting questions on their websites, see who you get a good feeling with and then I would suggst you go with your gut. Use the trustee that leaves you with a sense of confidence in both their abilities and how they approach and craft the proposal.