497 B.R. 112
Bankr. D.N.M.2013Background
- The court revisits whether a Chapter 13 trustee may pay herself the statutory percentage fee when no plan is confirmed.
- Two NM cases (Acevedo and Harrell) had plan payments, but neither plan was confirmed; the trustee collected 10% fees in both cases.
- The US Trustee Handbook advised standing trustees to retain debtor payments until confirmation and return funds on dismissal or conversion.
- Statutes at issue: 28 U.S.C. § 586(e) fixes the percentage fee and directs collection from plan payments; 11 U.S.C. § 1326 governs debtor payments to the trustee and distributions if a plan is confirmed or not.
- The court adopts a harmonized reading: § 1326(a)(1)(A) includes trustee fees in payments proposed by the plan, while § 1326(a)(2) governs return of payments if no plan is confirmed; § 586(e)(2) governs collection but is not read in isolation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can trustee fees be retained in unconfirmed Chapter 13 cases? | Trustee argues § 586(e)(2) mandates collection in all cases. | UST contends fees are not payable in unconfirmed cases or must be treated under § 1326(a)(2). | No; fees cannot be retained when no plan is confirmed. |
| Does §1326(a)(1)(A) include trustee fees as part of 'payments ... proposed by the plan'? | Fees are mandatory under § 586(e)(2) and thus included in 'payments proposed'. | Proposed payments refer to amounts to creditors, not mandatory fees. | Yes; trustee fees are included in 'payments proposed by the plan'. |
| Does §1326(a)(2) require return of all payments to the debtor in unconfirmed cases after deducting admin expenses? | Payments are retained and allocated per §1326(a)(2) with possible deductions. | Fees can be retained and deducted before returning funds. | Yes; in unconfirmed cases, the trustee must return payments to the debtor after deducting administrative expenses, but not the trustee’s percent fee. |
| Can §586(e)(2) be harmonized with §1226(a) and §1326 to support the result? | §586(e)(2) plainly governs collection in all plans; §1226(a) for Chapter 12 allows deduction of fees in unconfirmed cases. | Chapter 12 provision cannot be read into Chapter 13; harmonization favors limiting fees in unconfirmed Chapter 13 cases. | Yes; §586(e)(2) collects fees pending confirmation, while §1326(a)(2) governs timing and amount of disbursement; Chapter 12 language does not force identical treatment in Chapter 13. |
Key Cases Cited
- In re BDT Farms, Inc., 21 F.3d 1019 (10th Cir.1994) (trustee fee construed as part of the entire monthly payment under plan)
- In re Schollett, 980 F.2d 639 (10th Cir.1992) (bankruptcy court lacks authority to adjust fixed § 586(e) percentage fees)