Summary of a Recent
Judicial Development in
Bankruptcy

Chapter 13 Trustee's Fee Cannot Exceed 10%
of Total Received from Debtor

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In In re Jackson, 321 B.R. 94 (Bankr. S.D. Ga. 2005), the United States Bankruptcy Court for the Southern District of Georgia, Savannah Division, held that the Executive Office of the United States Trustee's method of calculating trustee fees, in which fees come from the amount received by the trustee from the debtor, was the proper method to use.

Background

A Chapter 13 Debtor filed an objection to the Trustee's fees, alleging that the Trustee charged a percentage fee greater than authorized by statute which resulted in higher plan payments. Id. at 95. The Debtor presented evidence that the Trustee's estimated fee was 11.11% of the amount to be paid to creditors, which was also 10% of the total amount received from the Debtor. Id. at 96.

Arguments

The Debtor argued that the Trustee was charging 11.11% of the total payments made to creditors, a percentage fee greater than authorized by statute (greater than 10%). Id. at 95.

The Trustee argued that she was only receiving an estimated 10% of the total amount received from the Debtor, which is allowed by statute. Id. at 96.

Analysis and Holdings

The issue before the court was how to calculate the trustee fee; specifically, whether the fee comes from payments made under the plan or payments received from the Debtor. Id. at 97. The Attorney General is allowed to set the percentage fee for trustees under 28 U.S.C. § 586(e)(1) & (2), and the parties stipulated that he properly delegated his authority to the Executive Office for the United States Trustee (EOUST). Id. at 96. EOUST has determined that "the percentage fee is applied from all payments received by the standing trustee from the debtor under the plan." The State Attorney General is prohibited by 28 U.S.C. § 586(e)(1)(B)(ii)(I) from setting a percentage trustee fee that exceeds 10% of "payments made under the plan" in Chapter 12 cases; however, Congress made no similar provision for Chapter 13 cases. Id. at 97. In the absence of any direction from the language of the statute or from the legislative history, the court deferred to the policy set forth by the EOUST. Id. at 98. "Its policy of drawing the percentage fee from the total of payments received has been in place for at least five years. It is a simple, easy to apply formula." Id. Therefore, the court overruled the Debtor's objection. Id. at 99.

The case was decided on January 21, 2005.