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Bankruptcy court rules on Chapter 7 trustee compensation

South Carolina residents who are considering a Chapter 7 personal bankruptcy may be aware that trustees are appointed to ensure that the laws and procdures are followed, but they may not know that the compensation of these trustees is strictly regulated and commission based. The creditors of an Illinois construction company that filed a Chapter 7 petition sought legal remedies when the trustee involved claimed the maximum commission allowed by law, but a May 17 U.S. Bankruptcy Court decision clarified the rules and dismissed the creditors' objections.

Before making the ruling, the judge pointed out that the Chapter 7 trustee concerned had performed her duties in a diligent and expeditious manner and had made every effort to keep administrative costs down. The trustee sought compensation of $12,362 plus the reimbursement of some minor expenses for her services, which the creditors claimed was excessive. The creditors based their arguments on the brief amount of time that the trustee had devoted to her duties.

The U.S. Bankruptcy Code requires trustees to submit detailed time records, and the documents filed by the trustee in the Illinois case showed that she had worked on the case for less than 14 hours. The creditors asked the court to award the trustee compensation based on an hourly rate rather than commission, but the judge was not swayed by these arguments as the special circumstances required for trustees to be compensated at rates below statutory limits were not present.

Illinois companies that are struggling with difficult financial situations may have a number of debt relief options available to them, but these choices can sometimes make reaching a wise decision difficult. Experienced bankruptcy attorneys may assist those in this situation by explaining the alternatives to a straight liquidation.

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