Bankrupt Firms Could Pay Higher Fees

The U.S. Trustee Program has proposed a 30 percent increase in the quarterly fees paid by most of the companies that file for Chapter 11 bankruptcy, according to a story this weekend from the Dow Jones Newswires. The U.S. Trustee, an office of the Justice Department that monitors consumer and business bankruptcy cases, also seeks to triple the fees paid by the largest companies.

Businesses pay quarterly fees to the U.S. Trustee based on disbursements made by or on behalf of the company, according to the trustee’s website, the Newswires reports. The proposal has been approved by the U.S. House of Representatives and seeks Senate confirmation.

A company with disbursements of between $1 million and $1.9 million in a quarter is now paying a $5,000 fee, but that would rise to $6,500 under the trustee’s budget proposal for fiscal year 2008. There is also a cap of $10,000 per quarter on what companies pay now. The U.S. Trustees seek to increase those fees for the largest companies to $15,000 and $30,000 depending on their disbursements.

A spokesperson for the Office of Management and Budget said the fee increase was requested to fulfill new responsibilities given to the U.S. Trustee under the 2005 overhaul to the Bankruptcy Code.

Opponents of the plan say it will make it tougher for companies to exit from bankruptcy. "We must keep in mind that debtors are in Chapter 11 because they need an opportunity to reorganize. To have them now pay a higher percentage of their income to the Office of the U.S. Trustee just puts one more burden on them," said Jeffrey Wurst, a bankruptcy attorney with Ruskin Moscou Faltischek in New York. Wurst is a vice president of the Turnaround Management Association, a Chicago-based industry group representing restructuring professionals. He says the new fees will be particularly onerous for small and midsized companies.