Bankruptcy by the hour

The ‘median’ hourly rates for trustees in bankruptcy are from $470 to $600, according to the Australian Financial Security Authority, with outlier rates potentially well out on either side of the median.

These are rates that AFSA allows registered trustees in private practice who agree to take on the administration of bankrupt estates from the government trustee, the Official Trustee in Bankruptcy, which is part of AFSA.

Given what is to be said the limited resourcing of AFSA, there is a national panel of registered trustees. As AFSA explains,

“on occasion, the OT has cause to transfer bankrupt estates to RTs in order to ensure timely and robust administration.  These transfers are effected pursuant to sections 181A and 157(1) of the Bankruptcy Act”.

A process exists of trustees nominating to be on the panel and then agreeing to be bound by the conditions of the transfer arrangement.

One condition is that trustees on the panel agree to charge remuneration on transferred estates not in excess of ‘median industry hourly rates’.  AFSA says its assessment of median rates is ‘conducted against all staffing levels annually’.

AFSA advises that the following new rates (exclusive of GST) came into effect from 1 June 2018:

 Role Range ($/hr)
Appointee/Trustee $470 – $600
Manager/Supervisor $350 – $450
Analyst/Senior $275 – $315
Intermediate/Accountant $225 – $295
Secretary/Graduate $175 – $215
Junior/Admin support $80 – $175

The law

Once an estate is transferred, it is the creditors who have the primary authority to determine the amount of a trustee’s remuneration, under the Bankruptcy Act.

Trustees commonly charge at hourly rates, although other bases are available.  They can charge on a commission basis, including at a rate set by the law: commencing at 20% for the first $30,000 realised and down to 15% over $50,000: s 60-20 IPRB.

The only basis of remuneration that creditors cannot change is that of the Official Trustee. It generally charges on a commission basis, of $4000 plus 20% of moneys realised beyond that. In other circumstances, it charges at $250 per hour:  Bankruptcy (Fees and Remuneration) Determination 2015

While charging at an hourly rate has its critics, certainly in other areas of professional charging, it is generally retained in insolvency practice. AFSA acknowledges that the hourly rate of trustees may be set to take account of the inherent risk in bankruptcy of there being insufficient assets in estates to pay for the work done: IGPD 14 – Proper performance of duties of a bankruptcy trustee.  

Next

Liquidators’ charges.

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