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How does a Bankruptcy Trustee get paid?
The Trustee under a bankruptcy is required to collect that value of items (assets and income) based on the requirements of the Bankruptcy and
Insolvency Act (“BIA”). The Trustee uses the BIA , a Canadian federal Act, as their authority to administer the bankruptcy process.
The 2 general streams of funds that a bankruptcy collects are:
- Assets - The Trustee is required to review the values of each debtors assets who enter into bankruptcy. Some assets debtors can keep and these differ from province to province, (Provincial Exemptions), while others the Trustee will either sell to collect their value, or allow the debtors to purchase their value back over the bankruptcy period. A Trustee will always review the value of the debtors assets prior to assignment to the debtor will understand their duties (if they the assets are to be sold or purchased back) during the bankruptcy process.
- Income - For each month that a debtor remains in the bankruptcy process, his/her income is reviewed and compared to a guideline amount (Income Guideline). Any income earned by the debtor or family above this guideline amount is considered Surplus Income. 50% of any surplus is payable to the Trustee and 50% the debtor can keep for themselves.
From these two general streams of funds that the Trustee collects from the debtor are placed into a “Trust Account” for the benefit of the creditors of the debtor. Any fees that the Trustee wishes to charge are governed by the BIA and can only be drawn upon according to specific schedules under the BIA, with creditor or Inspector approval, and approval of the Superintendent of Bankruptcy and the Court. Once the Trustee has taken their fees as allowed under the legislation, if there are funds remaining, the Office of the Superintendent imposes a levy and takes the next $200, and any funds above that is used to form a prorata dividend to the debtor’s creditors.
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