§ 136.4     Trustees’ Fees and Expenses before BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 136.4, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Logically, compensation and reimbursement of expenses of the Chapter 13 trustee1 would be administrative expenses under § 503, entitled to priority under § 507. It is certainly true in Chapter 7 and Chapter 11 cases that trustees’ fees and expenses are administrative expenses under § 503, entitled to second priority under § 507(a)(2).2 For reasons not altogether clear, the percentage fee allowed to a standing Chapter 13 trustee under 28 U.S.C. § 586(e)(1)(B) is not identified by the Code as an administrative expense.3

[2]

Section 507 establishes as the second priority “administrative expenses allowed under § 503(b) . . . and any fees and charges assessed against the estate under Chapter 123 of Title 28.”4 Section 503(b) describes various kinds of allowable administrative expenses, but nowhere does § 503(b) make reference to the compensation or expenses of a standing Chapter 13 trustee.

[3]

Under 28 U.S.C. § 586(e), compensation and expenses of standing Chapter 13 trustees are fixed by the Attorney General after consultation with the U.S. trustee.5 Section 586(e)(2) is not in Chapter 123 of Title 28. Section 586(e)(2) directs that the trustee in a Chapter 13 case “shall collect” the percentage fees fixed by the U.S. trustee from all payments received by the trustee.6 However, nowhere does § 586(e) define compensation or expenses of a Chapter 13 trustee to be administrative expenses.

[4]

11 U.S.C. § 503(b)(2) defines as an allowable administrative expense “compensation and reimbursement awarded under § 330(a).” Section 330(a) recites that the court may award compensation and reimbursement of expenses to a trustee “subject to §§ 326 . . . of this title.”7 Section 326(b) quite specifically states that “in a case under Chapter . . . 13 of this title, the court may not allow compensation for services or reimbursement of expenses of . . . a standing trustee appointed under § 586(b) of title 28.”8 Thus, § 326(b) prohibits a bankruptcy court from allowing compensation or reimbursement of expenses to a standing Chapter 13 trustee, and the definition of administrative expenses in § 503(b)(2) seems, by cross-reference, to be specifically “subject” to the exclusion in § 326(b).

[5]

It might be argued that the nonexclusive word “including” in § 503(b) does not limit the allowance of administrative expenses to the examples that follow.9 This general rule of statutory construction, however, runs squarely into the chain of specific exclusions in §§ 503(b)(2), 330(a), 326(b) and 28 U.S.C. § 586.

[6]

Section 330(a) simply doesn’t work in concert with 28 U.S.C. § 586(e). The fixing of reasonable compensation and the reimbursement of expenses normally within the discretion of the bankruptcy court under § 330(a) is performed by the Attorney General in Chapter 13 cases under 28 U.S.C. § 586(e).

[7]

There is support elsewhere in the Code for the view that the percentage fee of a standing Chapter 13 trustee is not an administrative expense under § 503(b). Section 1326(b)(2) contains a specific provision for payment of fees to a standing Chapter 13 trustee:10

(b) Before or at the time of each payment to creditors under the plan, there shall be paid—
(1) Any unpaid claim of the kind specified in section 507(a)(2) of this title; and
(2) If a standing trustee appointed under section 586(b) of title 28 is serving in the case, the percentage fee fixed for such standing trustee under section 586(e)(1)(B) of title 28.11
[8]

After BAPCPA, § 507(a)(2)—referenced in § 1326(b)(1)—establishes a second priority for “administrative expenses allowed under section 503(b) of this title.”12 Ordinary canons of statutory interpretation instruct that Congress would not have made a special provision for the payment of the percentage fee for standing trustees in § 1326(b)(2) if that fee was already included in the definition of administrative expenses under § 507(a)(2) referenced in § 1326(b)(1). In other words, § 1326(b) is constructed that the percentage fee for a standing trustee under 28 U.S.C. § 586(e)(1)(B) must be something other than a “claim of the kind specified in § 507(a)(2),” else the two subsections of § 1326(b) are redundant.

[9]

This omission of the trustee’s fees and expenses as administrative expenses in a Chapter 13 case has consequences. If the fees of a standing trustee are not administrative expenses, then the trustee does not have to make a “timely . . . request” under § 503(a).13 If there is no request to the court, then of course, there is no action or involvement of the court in the fixing or allowing of fees and reimbursement of expenses to a standing Chapter 13 trustee.14 Because fees and expenses of a standing Chapter 13 trustee are outside the ordinary allowance procedures under the Code, there are problems when the standing trustee needs to compensate an attorney for representing the trustee or representing a Chapter 13 estate. For example, from what fund and with whose permission (if any) does the trustee compensate an attorney who represents the trustee in recovering a preference or avoiding a fraudulent conveyance?15 Also, if the standing trustee’s fees and expenses are not administrative expenses, on what basis do unpaid trustee’s fees and expenses compete with administrative expenses and priority claims when the Chapter 13 case fails or converts to Chapter 7?16

[10]

One court followed the interaction of §§ 326(b) and 330(a) to the conclusion that the percentage fee of a Chapter 13 trustee in 28 U.S.C. § 586(e) is not an expense of administration under § 503.17 Another court noted that fees for a Chapter 13 trustee’s attorney incurred in litigation with the debtor, although not payable from the estate, could be recovered under 28 U.S.C. § 586(e)(2)(B)(ii).18 This cross-reference suggests that, with the approval of the Attorney General, a Chapter 13 trustee might use interest earned on the deposit of payments under plans to pay expenses of administration.19 The court did not suggest that a Chapter 13 trustee’s attorney’s fees are traditional administrative expenses under § 503 of the Code.

[11]

This issue—whether compensation and expenses of a Chapter 13 trustee are administrative expenses under § 503—arises when a plan fails of confirmation and the trustee has to determine what to do with payments received from the debtor. 11 U.S.C. § 1326(a)(1) requires the debtor to commence making payments “not later than 30 days after the date of the filing of the plan or the order for relief, whichever is earlier.”20 11 U.S.C. § 1326(a)(2) states that a payment proposed by the plan to the trustee “shall be retained by the trustee until confirmation or denial of confirmation of a plan.”21 If no plan is confirmed, “the trustee shall return any such payments not previously paid and not yet due and owing to creditors pursuant to paragraph (3)22 to the debtor, after deducting any unpaid claim allowed under § 503(b).”23 The failure of the Code to include the percentage fee of a standing Chapter 13 trustee as an administrative expense could preclude recovery of the fee in an unconfirmed case.

[12]

On the other hand, § 1326(b), quoted above, contemplates payment of the percentage fee for the standing trustee “before or at the time of each payment to creditors under the plan.” Payments to creditors under Chapter 13 plans typically do not commence until after confirmation—except, perhaps, preconfirmation personal property lease and adequate protection payments after BAPCPA.24 The conjunctive wording of § 1326(b) is subject to several interpretations. The phrase “before . . . each payment to creditors” could be interpreted to allow a Chapter 13 trustee to recover the percentage fee in unconfirmed cases. If so interpreted, § 1326(b)(2) supports the Chapter 13 trustee’s argument for recovery of the percentage fee without regard to whether a plan was confirmed.25 The 1978 legislative history to § 1326 supports the view that the trustee’s fees are recoverable before payments to creditors despite the absence of a priority.26 Prior to BAPCPA, the Bankruptcy Appellate Panel for the Tenth Circuit held that the standing Chapter 13 trustee’s fees and expenses are not administrative expenses under § 503(b) and cannot be collected from funds paid to the trustee when the case fails before confirmation.27

[13]

Prior to the 1986 amendments to 28 U.S.C. § 586(e), there was much controversy in Chapter 13 cases whether the trustee was entitled to compensation and expenses on payments by the debtor directly to creditors.28 The 1986 amendment to 28 U.S.C. § 586(e)(2) resolved this question in favor of debtors clarifying that the Chapter 13 trustee collects the percentage fee “from all payments received by such individual under plans.”29 The phrase “received by” has the incidental effect of supporting the view that a standing trustee can collect the percentage fee in an unconfirmed case in which there will be no distributions to creditors.

[14]

This logic also signals that confirmation is irrelevant to the amount of percentage fee that is due the standing Chapter 13 trustee. As mentioned elsewhere,30 in some districts, when a Chapter 13 plan fails before confirmation, the standing trustee takes a fee that is substantially less than the ordinary percentage fee. If the trustee’s fee is not an administrative expense but is a fee collected from all payments received by the trustee under 28 U.S.C. § 586(e)(2) even before payments to creditors, then the full percentage fee is deducted in an unconfirmed case before disposition of the funds remaining in the hands of the trustee.

[15]

The status of the trustee’s compensation and expenses is complicated when a Chapter 7 case converts to Chapter 13 and there are unpaid trustees’ fees, expenses and fees for professionals from the prior case.31 Conversion from Chapter 7 to Chapter 13 terminates the services of the Chapter 7 trustee.32 Prior to BAPCPA, it had been held that the trustee and professionals hired by the trustee in the prior Chapter 7 case were not entitled to fees for services rendered after conversion to Chapter 13.33

[16]

BAPCPA added a strangely worded new § 1326(b)(3) that provides for payment in a subsequent Chapter 13 case of a Chapter 7 trustee’s compensation that “has been allowed . . . due to the conversion or dismissal of the debtor’s prior case pursuant to section 707(b).”34 This provision is limited to conversions or dismissals pursuant to § 707(b), does not specify that the payment has any particular priority and does not cover all circumstances where the Chapter 7 trustee might be entitled to compensation for work done in the prior Chapter 7 case.35

[17]

Before BAPCPA added § 1326(b)(3), it had been held by some courts that preconversion fees for professional services are priority administrative expenses in the Chapter 13 case.36 In In re Woodworth,37 after conversion from Chapter 7 to Chapter 13, the court limited the Chapter 7 trustee’s priority claim for compensation to the minimum amount authorized by § 330(b), notwithstanding that the trustee in the Chapter 7 case had discovered unencumbered assets prompting conversion to Chapter 13. In In re Stabler,38 upon conversion to Chapter 13, the Chapter 7 trustee was allowed a priority claim for compensation on a “quantum meruit basis” when the Chapter 7 trustee performed substantial services but did not disburse money to creditors. In In re Colburn,39 at conversion to Chapter 13, the Chapter 7 trustee was awarded at double normal hourly rates based on extraordinary efforts that converted a no-asset Chapter 7 into a 100 percent plus interest Chapter 13 case.

[18]

One reported decision finds an odd limit on the maximum compensation payable to the Chapter 7 trustee at conversion to Chapter 13. In In re Rodriguez,40 the Chapter 7 case converted after the trustee performed substantial services but before distributions to creditors in the Chapter 7 case. The bankruptcy court concluded that the Chapter 7 trustee was entitled to a priority administrative expense in the Chapter 13 case, but the court reasoned that the “trustee” identified in § 326(a)41 was the “composite trustee” composed of the Chapter 7 trustee before conversion and the standing Chapter 13 trustee after conversion. Notwithstanding that § 326(a) fixes a limit on compensation to a trustee in a case “under Chapter 7,” the court held that the limitation in § 326(a) applied to the composite trustee. The maximum fee calculation under § 326(a) was then applied to the combined fee of the Chapter 7 and standing Chapter 13 trustees:

In the case now before the Court, the composite “trustee” will, if the chapter 13 plan is fully performed, disburse $5,329 . . . . Her ten percent fee will be $532. Under section 326(a), then, the total amount to be disbursed “in the case by the trustee” is also $5,329. Thus, the fee payable to the chapter 7 trustee is capped at 25 percent of the first $5,000 or less and 10% on any amount in excess of $5,000, which is $1,282.90. That amount is the maximum fee that can be paid to all of the trustees in the aggregate in this case. Because the chapter 13 trustee, by statute and by authorization of the U.S. Trustee, is authorized to receive $529 as compensation, the maximum compensation that can be paid to the chapter 7 trustee, Mr. Weinman, is $753.90 . . . together with his expenses in the amount of $83.50.42
[19]

The Rodriguez reasoning does not limit the percentage fee of the Chapter 13 trustee after conversion but would significantly limit the allowable administrative expense of the Chapter 7 trustee after conversion in many cases. The policy expressed by the Rodriguez court is that Chapter 7 trustees should be encouraged to discover assets and to force the conversion of Chapter 7 cases to Chapter 13 cases, but respecting the § 326(a) cap after conversion to Chapter 13 puts a limit on compensation that works contrary to that policy. As a matter of statutory construction, it is not clear why § 326(a) would apply after conversion.

[20]

Other courts have allowed the Chapter 7 trustee compensation as an administrative expense after conversion to Chapter 13, citing the reasonableness standard in § 330(a) without limitation by § 326(a).43 Six lines of authority were identified in In re Silvus:44

the quantum meruit theory; “the ‘multiple’ or ‘composite’ trustee theory; the theory that the plain language of Section 326(a) precludes such an award; the theory that the Chapter 13 case should be treated as a [sic] separate and distinct from the Chapter 7 case; the ‘constructive disbursement’ theory; and the theory that fees may be awarded pursuant to Section 105 of the Bankruptcy Code.”45

Adopting what it called the majority view, the court in In re Pivinski46 awarded quantum meruit fees, when the Chapter 7 trustee’s efforts contributed to 100 percent payment of creditors in the Chapter 13 case.

[21]

These cases indicate that on different theories, and without any consistent methodology, a significant number of courts allow the Chapter 7 trustee a priority claim for compensation after conversion to Chapter 13. The amount of that claim is not necessarily calculated as it would have been had administration of the Chapter 7 case been completed. Chapter 13 debtors can argue that conversion to Chapter 13 is one of the risks that the Chapter 7 trustee accepts in undertaking administration of the Chapter 7 case.47 On the other hand, it is inequitable that the Chapter 7 trustee becomes the victim of success. When a trustee diligently administers the Chapter 7 case and through good efforts turns up assets or otherwise causes the debtor to convert to Chapter 13, the Chapter 7 trustee should be well compensated and entitled to administrative expense priority in the Chapter 13 case.48


 

1  See discussion beginning at § 54.1  Standard Percentage Fee and Expenses.

 

2  See 11 U.S.C. §§ 503(b)(2), 330(a), 326(a).

 

3  See §§ 416.1 [ Compensation and Expenses of Chapter 13 Trustee ] § 54.2  Compensation and Expenses of Chapter 13 Trustee after BAPCPA and 514.1 [ Trustees’ Fees and Expenses ] § 136.5  Trustees’ Fees and Expenses after BAPCPA for discussion of the impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Pub. L. No. 109-8, 119 Stat. 23 (2005), on characterization of a trustee’s fees as administrative expenses.

 

4  11 U.S.C. § 507(a)(2), as amended by BAPCPA, Pub. L. No. 109-8, 119 Stat. 23 (2005). Chapter 123 of Title 28 deals with fees and costs such as filing fees and percentage fees payable to the U.S. trustee in Chapter 11 cases. There is no reference in Chapter 123 of Title 28 to the trustee’s fees or compensation in Chapter 13 cases.

 

5  See § 63.1 [ Standard Percentage Fee and Expenses ] § 54.1  Standard Percentage Fee and Expenses. BAPCPA added 28 U.S.C. § 586(e)(3), permitting judicial review after exhaustion of administrative remedies. See § 416.1 [ Compensation and Expenses of Chapter 13 Trustee ] § 54.2  Compensation and Expenses of Chapter 13 Trustee after BAPCPA.

 

6  28 U.S.C. § 586(e)(2).

 

7  11 U.S.C. § 330(a).

 

8  11 U.S.C. § 326(b) (emphasis added). The phrase “may not” in § 326(b) is “prohibitive, and not permissive.” 11 U.S.C. § 102(4).

 

9  See 11 U.S.C. § 102(3): “ ‘includes’ and ‘including’ are not limiting.”

 

10  See also §§ 63.1 [ Standard Percentage Fee and Expenses ] § 54.1  Standard Percentage Fee and Expenses, 204.2 [ Order of Payments to Creditors ] § 113.7  Order of Payments to Creditors before BAPCPA and 501.1 [ Order of Payments to Creditors ] § 113.8  Order of Payments to Creditors after BAPCPA.

 

11  11 U.S.C. § 1326(b), as amended by BAPCPA, Pub. L. No. 109-8, 119 Stat. 23 (2005).

 

12  11 U.S.C. § 507(a)(2), as amended by BAPCPA, Pub. L. No. 109-8, 119 Stat. 23 (2005).

 

13  See § 132.2  In General: Filing is Required for Allowance, § 132.6  Priority Claims, Including Requests for Payment of Administrative Expenses, § 132.9  Postpetition Claims, § 136.5  Trustees’ Fees and Expenses after BAPCPA§ 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

14  See below in this section, and see § 63.1 [ Standard Percentage Fee and Expenses ] § 54.1  Standard Percentage Fee and Expenses.

 

15  See § 60.1 [ Avoidance and Recovery Powers ] § 53.12  Avoidance and Recovery Powers.

 

16  See below in this section, and see § 54.9  Compensation When Case Is Dismissed or Converted before Confirmation, § 142.5  On Postpetition Claims, § 143.1  In Cases Filed before October 22, 1994, § 143.2  In Cases Filed after October 22, 1994, § 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA§ 143.4  Priorities after Conversion: Two Trustees and a DSO and § 153.1  In General.

 

17  In re Turner, 168 B.R. 882, 886 (Bankr. W.D. Tex. 1994) (“Indeed, section 326(b) explains that a standing trustee’s percentage fee is not governed by section 326(a), which takes it out of section 330(a) . . . and so out of section 503(b)(1)(A). . . . There is no ‘priority’ for the trustee’s percentage fee in section 507, and it does not stand as a ‘claim’ against the estate.”). But see In re Carr, 159 B.R. 538 (D. Neb. 1993) (Without discussion, in a footnote, “the trustee’s fees are entitled to priority pursuant to 11 U.S.C. § 507(a)(1).”).

 

18  In re Moore, 188 B.R. 671, 677 n.11 (Bankr. D. Idaho 1995) (Chapter 13 trustee is entitled to recover attorney’s fees for litigation with the debtor over entitlement to insurance proceeds. In a footnote, “[a]lthough the fees for the trustee’s attorney are not payable from the chapter 13 estate, the insurance proceeds, or through the debtors’ plan, payment may be obtainable under the provisions of 28 U.S.C. § 586(e)(2)(B)(ii).”).

 

19  28 U.S.C. § 586(e)(2)(B)(ii) provides in part: “Subject to the approval of the Attorney General, any or all of the interest earned from the deposit of payments under plans by such individual may be utilized to pay actual, necessary expenses without regard to the percentage limitation contained in subparagraph (d)(1)(B) of this section.”

 

20  11 U.S.C. § 1326(a)(1), as amended by BAPCPA, Pub. L. No. 109-8, 119 Stat. 23 (2005). See discussion of debtor's obligation to begin making payments at § 44.1  First Test of Debtor’s Good Intentions.

 

21  11 U.S.C. § 1326(a)(2).

 

22  The enigmatic reference to “paragraph (3)” in § 1326(a)(2) as amended by BAPCPA may have been intended to insulate preconfirmation adequate protection and/or preconfirmation lease payments when a Chapter 13 case fails before confirmation. See §§ 401.1 [ Preconfirmation Payments ] § 44.6  Preconfirmation Payments after BAPCPA, 402.1 [ Disposition of Preconfirmation Payments ] § 44.7  Disposition of Preconfirmation Payments after BAPCPA, 534.1 [ Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) ] § 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA and 541.1 [ Consequences of Dismissal ] § 153.2  Consequences of Dismissal Added or Changed by BAPCPA.

 

23  11 U.S.C. § 1326(a)(2), as amended by BAPCPA, Pub. L. No. 109-8, 119 Stat. 23 (2005). BAPCPA amended § 1326(a)(1) to require personal property lease and adequate protection payments to be made prior to confirmation. See §§ 401.1 [ Preconfirmation Payments ] § 44.6  Preconfirmation Payments after BAPCPA, 402.1 [ Disposition of Preconfirmation Payments ] § 44.7  Disposition of Preconfirmation Payments after BAPCPA, 404.1 [ Adequate Protection before Confirmation ] § 47.2  Preconfirmation Adequate Protection after BAPCPA, 426.1 [ Adequate Protection Rights before Confirmation ] § 57.3  Preconfirmation Adequate Protection Rights after BAPCPA, 427.1 [ Preconfirmation Rights of Landlords and Lessors ] § 57.4  Preconfirmation Rights of Landlords and Lessors after BAPCPA, 534.1 [ Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) ] § 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA and 541.1 [ Consequences of Dismissal ] § 153.2  Consequences of Dismissal Added or Changed by BAPCPA.

 

24  11 U.S.C. § 1326(a)(1)–(a)(4). See §§ 401.1 [ Preconfirmation Payments ] § 44.6  Preconfirmation Payments after BAPCPA, 402.1 [ Disposition of Preconfirmation Payments ] § 44.7  Disposition of Preconfirmation Payments after BAPCPA, 404.1 [ Adequate Protection before Confirmation ] § 47.2  Preconfirmation Adequate Protection after BAPCPA, 426.1 [ Adequate Protection Rights before Confirmation ] § 57.3  Preconfirmation Adequate Protection Rights after BAPCPA, 427.1 [ Preconfirmation Rights of Landlords and Lessors ] § 57.4  Preconfirmation Rights of Landlords and Lessors after BAPCPA, 534.1 [ Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) ] § 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA and 541.1 [ Consequences of Dismissal ] § 153.2  Consequences of Dismissal Added or Changed by BAPCPA.

 

25  This interpretation was bolstered by BAPCPA’s amendment of § 1326(a), requiring payment of personal property lease and adequate protection payments to begin prior to confirmation. See §§ 401.1 [ Preconfirmation Payments ] § 44.6  Preconfirmation Payments after BAPCPA, 402.1 [ Disposition of Preconfirmation Payments ] § 44.7  Disposition of Preconfirmation Payments after BAPCPA, 404.1 [ Adequate Protection before Confirmation ] § 47.2  Preconfirmation Adequate Protection after BAPCPA, 426.1 [ Adequate Protection Rights before Confirmation ] § 57.3  Preconfirmation Adequate Protection Rights after BAPCPA, 427.1 [ Preconfirmation Rights of Landlords and Lessors ] § 57.4  Preconfirmation Rights of Landlords and Lessors after BAPCPA, 534.1 [ Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) ] § 143.3  Payments Held by Chapter 13 Trustee at Conversion: § 1326(a)(2) after BAPCPA and 541.1 [ Consequences of Dismissal ] § 153.2  Consequences of Dismissal Added or Changed by BAPCPA.

 

26  See S. Rep. No. 95-989, at 142 (1978). (“Section 1326 supplements the priorities provisions of section 507. Subsection (a) requires accrued costs of administration and filing fees, as well as fees due the Chapter 13 trustee, to be disbursed before payments to creditors under the plan.”).

 

27  Skehen v. Miranda (In re Miranda), 2001 WL 1538003, at *2 (B.A.P. 10th Cir. Dec. 4, 2001) (unpublished) (“[Section] 1326(a)(2) . . . unambiguously calls for the standing Chapter 13 trustee, if a plan is not confirmed, to return all payments to the debtor, less any administrative expense claim pursuant to § 503(b). The standing Chapter 13 trustee’s percentage fee is not an administrative claim within the meaning of § 503(b).”).

 

28  See § 64.4 [ Compensation on Direct Payments by Debtor ] § 54.6  Compensation on Direct Payments by Debtor.

 

29  28 U.S.C. § 586(e)(2).

 

30  See § 64.7 [ Compensation When Case Is Dismissed or Converted before Confirmation ] § 54.9  Compensation When Case Is Dismissed or Converted before Confirmation.

 

31  See discussion of conversion from Chapter 7 to Chapter 13 beginning at § 148.1  Procedure.

 

32  11 U.S.C. § 348(e).

 

33  See In re Rakosi, 99 B.R. 47 (Bankr. S.D. Cal. 1989) (After conversion from Chapter 7 to Chapter 13, the law firm that represented Chapter 7 trustee is not entitled to any fees for services rendered after conversion. Section 503(b)(3)(D) is not available; unauthorized postconversion attorneys’ fees are not allowable as administrative expenses in the Chapter 13 case.).

 

34  11 U.S.C. § 1326(b)(3), as amended by Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Pub. L. No. 109-8, 119 Stat. 23 (2005), discussed in § 526.1 [ Chapter 7 Trustee Compensation: New § 1326(b)(3) ] § 138.10  Chapter 7 Trustee Compensation: § 1326(b)(3) after BAPCPA.

 

35  See § 526.1 [ Chapter 7 Trustee Compensation: New § 1326(b)(3) ] § 138.10  Chapter 7 Trustee Compensation: § 1326(b)(3) after BAPCPA for discussion of 11 U.S.C. § 1326(b)(3).

 

36  In re Wells, 87 B.R. 732 (Bankr. N.D. Ga. 1988). Accord In re Hages, 252 B.R. 789 (Bankr. N.D. Cal. 2000) (After conversion to Chapter 13, Chapter 7 trustee’s fees are administrative expenses entitled to be paid “pro rata and simultaneously” with expenses of administration of the Chapter 13 case.); In re Rodriguez, 240 B.R. 912 (Bankr. D. Colo. 1999); In re Colburn, 231 B.R. 778 (Bankr. D. Or. 1999).

 

37  70 B.R. 361 (Bankr. N.D.N.Y. 1987).

 

38  75 B.R. 135 (Bankr. M.D. Fla. 1987).

 

39  231 B.R. 778 (Bankr. D. Or. 1999).

 

40  240 B.R. 912 (Bankr. D. Colo. 1999).

 

41  11 U.S.C. § 326(a) states:

(a) In a case under chapter 7 or 11, the court may allow reasonable compensation under section 330 of this title of the trustee for the trustee’s services, payable after the trustee renders such services, not to exceed 25 percent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable compensation not to exceed 3 percent of such moneys in excess of $1,000,000, upon all moneys disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims.

 

42  240 B.R. at 915–16.

 

43  See In re Schuck, No. 06-80691, 2007 WL 2757160 (Bankr. C.D. Ill. Sept. 20, 2007) (unpublished) (Perkins) (Chapter 7 trustee allowed administrative expense claim for reasonable compensation for legal services rendered prior to conversion.); In re Mazon, No. 05-42215, 2006 WL 3106708 (Bankr. D. Idaho Oct. 30, 2006) (unpublished) (Pappas) (After conversion to Chapter 13, Chapter 7 trustee’s fees and trustee’s attorney fees were allowed as administrative expenses. Chapter 7 trustee who provides actual, reasonable and necessary services to estate is entitled to compensation under § 330(a) and is not limited by cap in § 326(a) on amount turned over to Chapter 13 trustee.); In re Barkell, No. 05-38602, 2006 WL 4846380 (Bankr. D. Utah Aug. 11, 2006) (unpublished) (Boulden) (Chapter 7 trustee awarded administrative expense for preconversion compensation based on reasonableness standard not limited by § 326.); In re Scott, No. 05 B 10001, 2006 WL 566441 (Bankr. N.D. Ill. Mar. 7, 2006) (unpublished) (Goldgar) (Chapter 7 trustee is allowed reasonable compensation for preconversion services, to be paid as administrative expenses in Chapter 13 case. Compensation to Chapter 7 trustee’s attorney was allowed under § 330(a), for preconversion work only.).

 

44  329 B.R. 193 (Bankr. E.D. Va. 2005).

 

45  In re Pivinski, 366 B.R. 285, 289 (Bankr. D. Del. Apr. 2, 2007) (quoting In re Silvus, 329 B.R. at 206).

 

46  366 B.R. 285 (Bankr. D. Del. Apr. 2, 2007). See also In re Jankowski, 382 B.R. 533 (Bankr. M.D. Fla. Sept. 28, 2007) (Glenn) (Fees of Chapter 7 trustee and trustee’s attorney for investigating errors and omissions in schedules and statements and for objecting to conversion to Chapter 13 were granted on quantum meruit basis.).

 

47  A Chapter 13 debtor might, of course, agree to payment of fees and expenses to the prior Chapter 7 trustee. See In re Starling, 359 B.R. 901 (Bankr. N.D. Ill. Jan. 11, 2007) (Schmetterer) (After contested conversion from Chapter 7 to Chapter 13, debtors agreed to pay Chapter 7 trustee’s fees of $8,937.50 and expenses of $24.60 as Chapter 13 administrative expenses.).

 

48  But see In re Belcher, Nos. 04-13326PM, 03-18286, 2008 WL 2331017, at *3 (Bankr. D. Md. June 2, 2008) (unpublished) (Mannes) (After conversion to Chapter 13, Chapter 7 trustee’s attorney was awarded fees for efforts to liquidate residence that inspired debtor’s spouse to file Chapter 13, which in turn produced significant payments to unsecured creditors from equity; however, because trustee’s attorney took overly active role after spouse’s Chapter 13 filing, requested fees were reduced. “The court will not allow all the compensation sought. At some point the Trustee should have taken a passive role with the Applicants’ activities limited to that of a watching brief.”).