Professional compensation is often a contentious issue in bankruptcy, as we have previously discussed. Compensation for chapter 7 trustees has been subject to a split among district and bankruptcy courts – some hold that fee awards for chapter 7 trustees should be based solely on the commission rates provided in section 326(a) of the Bankruptcy Code, while others hold that section 326(a) sets a maximum limit, rather than a standard for, awarding compensation.
In In re Rowe, the Fourth Circuit weighed in on the question of whether a bankruptcy court is required, in the absence of extraordinary circumstances, to compensate chapter 7 trustees on a commission basis.
In this case, the trustee requested a fee of $17,254.61. The bankruptcy court found that the trustee had failed to complete his duties properly or timely and reduced the fee to $8,020, which was the equivalent of a fee based on the trustee’s hourly rate. The trustee appealed the fee reduction, and the district court affirmed the bankruptcy court’s decision. The trustee then appealed to the Fourth Circuit.
The Bankruptcy Code: