A trustee under subchapter V of chapter 11 who is not a standing trustee is entitled to “reasonable” compensation under Section 330(a)(1), not subject to the cap in Section 326(b), according to Chief Bankruptcy Judge Joseph M. Meier of Boise, Idaho.
The subchapter V case had been dismissed before confirmation. Having served six months, the trustee filed an application for about $2,000. The subchapter V trustee was not a standing trustee under 28 U.S.C. § 586(b) but had been appointed as a disinterested person under Section 1183(a).
Unlike chapter 13, where the statute is unclear about a trustee’s compensation on dismissal before confirmation, Section 1194(a)(1) specifically allows compensating the subchapter V trustee when dismissal occurs before confirmation.
Although Judge Meier said in his December 7 opinion that the requested compensation was reasonable, he addressed questions not raised by the parties: (1) What is the statutory authority fixing or capping the amount of a non-standing subchapter V trustee’s fees; and (2) is the non-standing trustee entitled to any compensation at all as a result of faulty drafting in Section 326?
Judge Meier first looked at Section 326(a). It sets out sliding-scale compensation for trustees in chapters 7 and 11 but excludes trustees under subchapter V. Judge Meier therefore said that the subsection “specifically excludes” subchapter V trustees from receiving percentage compensation under Section 326(a).
Judge Meier’s reading of Section 326(a) makes sense. In subchapter V, the services of a trustee are intended to be limited. Subchapter V is also designed to be comparatively inexpensive for debtors. If sliding-scale compensation were allowed, a subchapter V trustee might receive very large compensation for very little work.
Judge Meier then turned to Section 326(b), which provides that the court in a subchapter V case “may not allow compensation” for a U.S. Trustee or a standing trustee “but may allow reasonable compensation under Section 330 . . . of a trustee appointed under section 1202(a) or 1302(a) of” the Bankruptcy Code.
Judge Meier saw three possible interpretations of Section 326(b). First, he said it could be read to mean “that no compensation should be allowed under subsection 330 to subchapter V trustees,” but only to trustees in chapters 12 and 13.
Judge Meier rejected the idea that Section 326(b) permits no compensation to a non-standing subchapter V trustee. He said that the subsection “does not present a bar to the Trustee to obtain compensation under Section 330(a)(1).”
The second possible reading of Section 326(b), Judge Meier said, is that “Congress only intended to place a percentage limitation on compensation to trustees who are not standing trustees in chapter 12 and chapter 13 and not to impose that cap on trustees in subchapter V.”
The third interpretation of Section 326(b) would understand Congress as capping the fees of non-standing trustees in chapters 12 and 13 and subchapter V. Judge Meier saw it as “likely that the intent of Congress was to make trustee compensation in subchapter V mirror that in chapters 12 and 13.”
“However,” Judge Meier said, adopting the third interpretation would require rewriting the statute, a step he declined to take.
Judge Meier therefore decided to enforce the statute “as written” by holding that Section 326(b) does “not prevent an award of compensation to the Trustee under § 330(a)(1), nor does it place a cap [on] such compensation.” He awarded the requested compensation as an administrative expense under Section 503(b)(2).
Observation
Section 330(a)(1) generally allows “reasonable compensation” to trustees, “subject to” Section 326. Standing alone, Section 330(a)(1) makes no distinction between standing and non-standing trustees. With regard to standing trustees, there are limitations on compensation elsewhere in the Bankruptcy Code and title 28.
As Judge Meier said, nothing in Section 326 or 28 U.S.C. § 586 applies to a non-standing trustee. Therefore, a non-standing trustee is entitled to compensation under the general provisions of Section 330(a)(1).
A trustee under subchapter V of chapter 11 who is not a standing trustee is entitled to “reasonable” compensation under Section 330(a)(1), not subject to the cap in Section 326(b), according to Chief Bankruptcy Judge Joseph M. Meier of Boise, Idaho.
The subchapter V case had been dismissed before confirmation. Having served six months, the trustee filed an application for about $2,000. The subchapter V trustee was not a standing trustee under 28 U.S.C. § 586(b) but had been appointed as a disinterested person under Section 1183(a).
Unlike chapter 13, where the statute is unclear about a trustee’s compensation on dismissal before confirmation, Section 1194(a)(1) specifically allows compensating the subchapter V trustee when dismissal occurs before confirmation.
Although Judge Meier said in his December 7 opinion that the requested compensation was reasonable, he addressed questions not raised by the parties: (1) What is the statutory authority fixing or capping the amount of a non-standing subchapter V trustee’s fees; and (2) is the non-standing trustee entitled to any compensation at all as a result of faulty drafting in Section 326?
Judge Meier first looked at Section 326(a). It sets out sliding-scale compensation for trustees in chapters 7 and 11 but excludes trustees under subchapter V. Judge Meier therefore said that the subsection “specifically excludes” subchapter V trustees from receiving percentage compensation under Section 326(a).