136 F.4th 415
2d Cir.2025Background
- Julia Soussis filed multiple Chapter 13 bankruptcy petitions to prevent foreclosure of her residence, with the most recent filed in May 2019.
- Soussis made $362,100 in pre-confirmation payments to the standing trustee as required by bankruptcy law, but never had a repayment plan confirmed by the court.
- After moving to dismiss her case before confirmation, the trustee returned most of the funds to Soussis but retained $20,592 (5.7%) as his statutory percentage fee.
- Soussis sought disgorgement of the fee, arguing that the trustee must return all pre-confirmation payments if no plan is confirmed.
- Both the Bankruptcy Court and District Court ruled for the trustee, allowing retention of the fee; Soussis appealed to the Circuit Court.
- The appellate court reviewed the legal issue de novo, focusing on interpretation of 11 U.S.C. § 1326 and 28 U.S.C. § 586.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can a Chapter 13 standing trustee retain the percentage fee from pre-confirmation payments if the plan is not confirmed? | Soussis: Trustee must return all pre-confirmation payments, including the percentage fee, if the plan is not confirmed, as per Section 1326(a)(2). | Trustees: Section 586(e)(2) requires collection and retention of the fee from all payments received under proposed plans, regardless of confirmation. | The trustee must return all pre-confirmation payments, including the fee, if the plan is not confirmed. |
Key Cases Cited
- Harris v. Viegelahn, 575 U.S. 510 (2015) (explains that pre-confirmation payments must be returned if a plan is not confirmed).
- Siegel v. Fitzgerald, 596 U.S. 464 (2022) (discusses structure and role of standing trustees in bankruptcy proceedings).
- Marshall v. Johnson, 100 F.4th 914 (7th Cir. 2024) (Circuit split favoring return of trustee fees absent confirmation).
- Matter of Evans, 69 F.4th 1101 (9th Cir. 2023) (trustee must return percentage fee if no plan is confirmed).
- In re Doll, 57 F.4th 1129 (10th Cir. 2023) (same holding on return of trustee fees in failed Chapter 13 cases).