Why 10%

On Mon, 10/27/2014 - 13:36

By admin

  1. The maximum fee for a Chapter 13 trustee is 10%. The Executive Office of the United States Trustee sets each Chapter 13 trustee’s percentage fee based on the estimated receipts in each office and the approved budget for each office. If receipts go up (or down due to declining filings) and/or there are changes in the trustee operations, the fee will be adjusted. In at least 13 of the 18 years I’ve been Chapter 13 trustee, my percentage fee has changed twice each year, and a couple of years it changed 3 or 4 times. Each time the percentage fee is adjusted, it is adjusted for EVERY open case. So, if my percentage fee were at 7% when the case was confirmed and the Executive Office increased my fee to 9.7% while the case were still open, then the remaining disbursements in the case would be at 9.7% until the next fee adjustment—which could go up or down.

  2. Many cases marginally make a distribution to unsecured creditors when calculated at 10%. If the fee were calculated at a lower percentage fee, and still produced only a marginal distribution to unsecured creditors, then an increase in the case would mean that the case will not complete as confirmed. Telling someone at the end of the case that another $3,000.00 is due—particularly when he/she hasn’t missed a payment—not only doesn’t make him/her happy, it reflects poorly on the bankruptcy system. The trustee office does not have sufficient staff to do motions to modify every affected case when there is a percentage fee change; and it is arguable that a percentage fee change is NOT an unanticipated change and therefore not subject to modification.

  3. If the debtors are paying all of their disposable income to a plan, then it doesn’t matter to the debtors what the trustee’s percentage fee is calculated at. 10% is an easy calculation to do; and, as noted previously, it is the maximum amount statutorily allowed by the Code. If the trustee percentage fee goes down, then the change inures to the benefit of the unsecured creditors; if the percentage fee goes up, then unsecureds are still getting what they are required to receive because confirmation was based on the percentage fee at its highest value.

  4. If a plan works at 10%, it’s going to complete on schedule barring post-petition claims, increases in mortgage payments through the trustee, or significant defaults in plan payments which result in increased interest being paid to the secured creditors.

  5. As long as the trustee fee remains below 10%, calculating the plan at 10% means that small discrepancies between the plan and actual allowed claims can generally be handled without an amended plan or increased plan payments. We have in the past year added secured claims in several cases simply by adding the amount of the secured monthly payment without any additional administrative fees because of: 1) calculating the trustee fee at 10% and 2) a small number of unsecured claims having been filed.

  6. When adding claims to a case, calculating the fee at 10% generally covers most of the additional attorney fee on the added claim without additional calculation or funds. For example, if a house/car payment of $500.00 is added to the plan, adding $550.00 to the plan payment will, with a bit of a “contribution” from the unsecured creditors’ pool of funds, cover all the administrative expenses. If the trustee fee is calculated at less than 10%, then each time a secured claim is added to the plan, not only will the trustee fees be required to be added to the claim but the attorney fees in Southern District cases as well, which will actually take the amount above the present 10% calculation.