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What does it cost to deal with a trustee in bankruptcy? What fees is he entitled to? These questions are quite relevant, albeit not always easily answered.

A trustee in bankruptcy performs a wide variety of services. He can, for example, act in the capacity of a trustee or administrator in a consumer proposal under the Bankruptcy and Insolvency Act (BIA). He may also carry out the role of monitor for the purposes of the Companies’ Creditors Arrangement Act (CCAA) or act as a consultant when advisory mandates in insolvency are required. Given that these varied actions call for different types of remuneration, it is worthwhile to try and shed some light on the situation.

First, let us note that the fees of a trustee in bankruptcy are established under the BIA itself when he acts as such, or when he assumes the role of administrator in a consumer proposal. The trustee’s remuneration is usually taken out from the funds recovered in the case.

The trustee’s fees in a summary bankruptcy

A bankruptcy is called a “summary” bankruptcy when, given that the bankruptcy is personal, the realizable assets are estimated at $15,000 or less. It is the most common type of bankruptcy. Rule 128 of the Bankruptcy and Insolvency General Rules (BIGR) stipulates that, for the summary administration of the estates of a bankruptcy, the trustee shall receive:

  • 100 per cent of the first $975 of receipts
  • 35 per cent of the portion of the receipts exceeding $975 without being greater than $2,000, if applicable
  • 50 per cent of the portion of the receipts exceeding $2,000, if applicable

For example, if the receipts of a bankruptcy are $1800, the trustee would be entitled to fees of $1,333.75, over and above the amount of the disbursements and taxes.

  • 100 per cent of the first $975 of receipts = $975
  • 35 per cent of the portion of the receipts exceeding $975 without being greater than $2,000 = $358.75
  • 50 per cent of the portion of the receipts exceeding $2,000 = $0
    Total fees = $1,333.75

The trustee’s fees in an ordinary bankruptcy

A bankruptcy is called an “ordinary” bankruptcy when the realizable assets are estimated at $15,000 or greater. It applies to both individuals and corporations alike.

When the bankruptcy calls for an ordinary administration, the trustee is entitled to fees representing 7% of the assets actually realized, as well as to any remuneration voted by the creditors or approved by the court. The disbursements actually incurred are to be added to such payments. Finally, the trustee may ask third parties to provide some guarantees or advance payments for fees, should the assets be insufficient or less than anticipated.

The trustee’s fees for the administration of a consumer proposal

The consumer proposal is, for the debtors, an alternative to bankruptcy. It consists of a settlement offer made to their creditors, according to which the amount will generally be for a fraction of the debt itself. Based on the means and resources of the debtors, it is to be completed within a maximum period of five years. The acceptance of the consumer proposal is subject to the creditors’ approval.

The trustee’s fees for the administration of a consumer proposal are set under rule 129 of the BIGR. In short, the trustee receives:

  • 100 per cent of the first $1,500 of receipts payable under the proposal
  • 20 per cent of the moneys, beyond the first $1,500, distributed to the creditors

For example, if the consumer proposal is to provide receipts of $4,000, the trustee would be entitled to fees of $2,000, over and above the amount of the disbursements and taxes.

  • the first $1,500 of receipts payable under the proposal = $1,500;
  • 20 per cent of the moneys, beyond the first $1,500, distributed to the creditors = $500;
    Total fees = $2,000

The trustee’s fees for the administration of a division I proposal

The division I proposal is a recourse available to companies who want to avoid bankruptcy. It can also be used under the CCAA.

For the purposes of a division I proposal, the fees, to be negotiated between the trustee and the debtor, are an integral part of the proposal and must be approved by the creditors and the court. Frequently, additional fees are to be considered for the payment of professionals, including accountants or lawyers, who will participate in the development and the conduct of the proposal. Very formal, this process involves many steps which must be rigorously followed.

The trustee’s fees for the administration of a specific mandate

Occasionally, the trustee may be offered a specific mandate. As it is the case for many other professionals, in such circumstances, the trustee’s fees are determined according to the hours actually worked and the hourly rate of the personnel in charge of the administration of the mandate.

Conclusion

If the assignment calls for the application of general principles, the disbursements and fees of the trustee in bankruptcy vary according to the mandate and the type of case. However, in all instances, the trustee will be able to clarify the costs of his action after examining the circumstances, and determining with the debtor the various solutions to be considered to reorganize his financial situation.

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