If you’re thinking about filing bankruptcy, you’ve probably already heard about the “trustee.”
And if you’ve done any research online (or spoken with friends who filed), you may have heard something like:
“The trustee gets a percentage of your payments.”
For many people, the next question is completely fair:
“Wait… why do they get paid a percentage? Isn’t a trustee a court employee? Don’t they get a salary?”
The truth is: bankruptcy trustees play a major role in the system, and the way they are paid is not always obvious — and it often feels unfair if you don’t understand what’s happening.
Let’s break it down.
First: Bankruptcy Trustees Are Not Regular Court Employees
A bankruptcy trustee is not usually a salaried employee of the court like a judge or clerk.
Instead, trustees are typically private individuals (often attorneys or financial professionals) who are appointed to a panel and assigned cases.
They work under the supervision of the United States Trustee Program, which is part of the Department of Justice.
But they are not “clocking in” at the courthouse every day as salaried employees.
Trustees are more like independent administrators.
They are appointed, regulated, and monitored — but their compensation is generally tied to the work they perform.
What Does a Bankruptcy Trustee Actually Do?
Many people assume trustees simply show up, glance at paperwork, and collect money.
In reality, trustees have serious legal duties, including:
- reviewing bankruptcy filings for accuracy
- conducting the Meeting of Creditors (the “341 meeting”)
- verifying income, expenses, and assets
- reviewing tax returns and bank statements
- monitoring Chapter 13 payment plans
- distributing money to creditors
- investigating fraud or hidden assets
- filing reports with the court
- ensuring the filer follows bankruptcy laws
In Chapter 7 cases, trustees also determine whether there are assets that can be sold to pay creditors.
In Chapter 13 cases, trustees oversee repayment plans that can last 3 to 5 years.
That’s a lot of responsibility — and if something is done incorrectly, trustees can face serious consequences.
Why Are Trustees Paid a Percentage?
Because the bankruptcy system is structured like an administrative program, not a traditional court job.
In Chapter 13 cases, the trustee is responsible for handling and distributing payments, which is essentially like running a financial system for thousands of people at once.
Trustees must:
- track payments
- process missed payments
- handle creditor claims
- send payments to creditors
- manage ongoing compliance
- maintain staff and office expenses
Trustees don’t just do this alone — most trustee offices have employees, accountants, and administrative staff.
The trustee fee helps fund the entire operation.
The Trustee Fee Is Built Into Your Chapter 13 Payment
Here’s something many filers don’t realize:
In most cases, the trustee fee is not “extra money you pay on top.”
It is usually taken out of your monthly plan payment before the rest is distributed.
So if your plan payment is $600 per month, the trustee fee comes out of that amount, and the remainder goes to creditors.
Is the Trustee’s Percentage “Profit”?
Not exactly.
The trustee fee is used to cover:
- payroll for staff
- office operations
- software and accounting systems
- compliance reporting
- case management
- audits and legal oversight
Trustees are managing thousands of cases and millions of dollars.
The percentage is essentially an administrative cost of running the bankruptcy program.
So Why Not Just Pay Trustees a Salary?
Great question — and honestly, many people believe that would be a more transparent system.
But the bankruptcy system was designed so that trustees are paid based on the volume of cases they manage, rather than taxpayers funding salaries for a massive federal bureaucracy.
In other words:
Trustees are funded by the bankruptcy system itself, not by government salaries.
This keeps bankruptcy administration largely “self-funded.”
Why It Feels So Unfair to Filers
Even though the trustee fee is legal and built into the system, many filers feel frustrated because:
- they’re already struggling financially
- they’re trying to get out of debt
- they’re making payments for years
- and it feels like someone is “taking a cut” of their hardship
And to be honest…
That feeling is understandable.
People file bankruptcy because they need relief, not because they want to pay extra people.
But trustees are required to manage and enforce the rules of the bankruptcy process.
Does the Trustee Get the Money in Chapter 7 Too?
Chapter 7 is different.
Chapter 7 trustees can receive compensation, but it depends on the type of case:
- In “no asset” cases, trustee compensation is limited.
- In asset cases (where property is sold), trustees can receive commissions based on the funds collected.
Again, this is because trustees are not salaried court employees — they are compensated based on work and results.
The Bottom Line
If you’re asking why trustees get paid a percentage, you’re asking a very smart question.
Here’s the simple answer:
Bankruptcy trustees are not salaried employees of the court.
They are appointed administrators who manage cases and distribute payments, and the system funds them through trustee fees.
While it may feel frustrating, trustee compensation is part of what keeps the bankruptcy system functioning.
Still Have Questions? You’re Not Alone.
Bankruptcy is confusing — and a lot of what you read online makes it sound like a money grab.
But the trustee’s job is to ensure fairness, compliance, and proper distribution of funds.
If you’re considering filing and want to understand what you’ll really be paying (and why), speaking with an experienced bankruptcy attorney can make everything clearer.
Because the biggest mistake people make is filing without knowing what to expect.
