INS1385 - Bankruptcy: Individuals

Remuneration and fees

Trustee’s in bankruptcy remuneration

A trustee other than the Official Receiver is entitled to receive remuneration for their services, as such.

Their remuneration is fixed in accordance with Rule 6.138 etc.

The rules were modified with effect from 1 April 2004. The Insolvency (Amendment Rules) 2004 inserted Schedule 6 and Rule 6.138A into the Insolvency Rules 1986.

The rules state that the remuneration shall be fixed either:

• as a percentage of the value of the assets which are realised or distributed or both, or
• by reference to the time properly given by the office holder and his staff in attending to matters arising in the insolvency.

The remuneration will be determined by

• the creditors committee (if there is one), or
• by a resolution of a meeting of creditors, or
• under rule 6.138A .

The rules set out in detail the factors relevant to determining how remuneration is to be fixed including:

• The complexity (or otherwise) of the case.
• Any respects in which there falls on the trustee any responsibility of an exceptional kind or degree.
• The effectiveness with which the IP appears to be carrying out, or to have carried out his duties as trustee, and
• The value and nature of the assets in the estate.

In practice most IPs propose a time costs basis as being most likely to bring them a return on their work. As the basis of remuneration is often determined shortly after appointment it is not clear how these considerations should be applied.

No agreement: Application of Rule 6.138A

• Rule 6.138A provides an alternative if the trustee cannot obtain creditors’ agreement to the basis of remuneration, and does not wish to make application to Court. The trustee may then apply the Insolvency Office Holder’s remuneration scale (Schedule 6 of Insolvency Rules 1986).

The scale allows remuneration, with limitations, to be drawn:

• on realisations

20% on the first £5,000

15% on the next £5,000

10% on the next £90,000

5% on the balance.

• on distributions

10% on the first £5,000

7.5% on the next £5,000

5% on the next £90,000

2.5% on the balance.

This was formerly the Official Receiver’s scale, contained in general regulations. It was placed in the rules when the basis of the Official Receiver’s remuneration changed. It is otherwise unaltered.

Official Receiver’s remuneration and administration fee

1. Where the Official Receiver acts as trustee
   
   

The Official Receiver’s entitlement to draw remuneration on the Official Receiver’s scale was revoked with effect from I April 2004. Instead, the OR is now entitled to time costs at set rates when a distribution is made.

2. Generally the Official Receiver is also entitled to a payment of:
   
   

In addition the Secretary of State is entitled to an ad valorum fee of 17% on realisations deposited in the Insolvency Services account.

Note: The basis for fixing the remuneration is broadly the same for both insolvent liquidations and bankruptcies. The relevant provisions are Rules 4.127–4.131 for liquidations and Rules 6.138-6.142 for bankruptcies.)