In the Fifth Circuit, chapter 7 trustees lock in higher compensation.

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Case Type:
Case Status:
Affirmed in part and Reversed in part
16-31151 (5th Circuit, Jan 26,2018) Published
Concerning Chapter 7 trustee fees, the Fifth Circuit rejected the rule that Section 326 is merely a statutory cap on fees that may be awarded to chapter 7 trustees. Instead, the Court held that "the percentage amounts listed in Section 326 are presumptively reasonable for Chapter 7 trustee awards." BAPCPA's addition of Section 330(a)(7) "is best understood as a directive to simply apply the formula of § 326 in every case." While the presumption may be rebutted, the Court explained that awards should only be increased or reduced under rare and extraordinary circumstances.
Procedural context:
Appeal from the District Court for the Eastern District of Louisiana. On appeal, the District Court adopted the discretionary approach, as articulated in In re King, 559 B.R. 158, 163 (Bankr. S.D. Tex. 2016) and In re Coyote Ranch Contractors, LLC, 400 B.R. 84, 92 (Bankr. N.D. Tex. 2009). Under that approach, bankruptcy courts view the fees in Section 326 as a cap, but then engage in a reasonableness review of the fees under section 330(a).
In the context of the trustee's attorneys' fees, the Bankruptcy Court ruled that reductions were warranted. Then, the Bankruptcy Court reduced the trustee's compensation, which had not been contested. Because the Bankruptcy Court's fee reduction did not include a lengthy explanation, the District Court reversed and remanded.
Reavley, Southwick and Haynes

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