Chapter 13 Fees to Be Repaid if No Plan Approved, 2nd Cir. Rules

Bankruptcy trustees appointed in Chapter 13 proceedings must return collected payments, including trustee percentage fees, to debtors in cases where a financial restructuring plan isn’t approved, a federal appeals court said.

Chapter 13 trustees—automatically appointed in consumer bankruptcies to collect and distribute payments to creditors—can only keep percentage fees when a debtor’s bankruptcy plan is confirmed, the US Court of Appeals for the Second Circuit ruled Friday.

While the bankruptcy code expressly allows trustees in cases filed under certain chapters to deduct percentage fees before returning payments made prior to a plan’s approval, the rules for Chapter 13 don’t authorize ...