Trustee’s Rights to Fees Paid to Debtor As Personal Representative o...

I received a call from an estate and probate attorney about one of his probate clients who filed Chapter 7 bankruptcy in Florida. The bankruptcy debtor had been appointed as personal representative of an estate before he had filed bankruptcy. Estate administration is ongoing.

Florida statutes provided that a personal representative is entitled to compensation for his work in the administration of a probate estate. The statutory fee is up to three percent of the probate estate value. In this particular case, the personal representative’s fee may be significant. The fee is not payable until approved by the court. The probate court has yet to approve payment to the bankruptcy debtor of any fees. The question is whether all or any part of the debtor’s personal representative fee is part of the debtor’s bankruptcy estate.

Initial legal research found no cases on point. On one hand, the trustee could argue that the debtor had acquired a right to be paid as soon as he was appointed by the court as personal representative prior to filing bankruptcy. On the other hand, the personal representative fee requires that the person actually do the work required to administer the probate estate, and there is no final entitlement until the personal representatives’s work and fee request is approved.

In my opinion, I think that if the probate court approves payment of a personal representative fee the trustee is entitled to part of the fee representing work the debtor did prior to filing bankruptcy. Probate work after bankruptcy is in the nature of compensation for future labor which is not part of a Chapter 7 estate. In this particular probate the bulk of the probate administration work remains to be done, so it may be that the amount of work prior to bankruptcy does not warrant the trustee investing much time in trying to assert a right to the personal representative fee.

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