11 U.S.C. § 326 — Limitation on compensation of trustee

Page 54 TITLE 11—BANKRUPTCY § 325 Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99–554 dependent upon the judicial district in- volved, see section 302(d), (e) of Pub. L. 99–554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. § 325. Effect of vacancy A vacancy in the office of trustee during a case does not abate any pending action or pro- ceeding, and the successor trustee shall be sub- stituted as a party in such action or proceeding. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2562.) HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95–989 Section 325, derived from Bankruptcy Act section 46 [section 74 of former title 11] and Bankruptcy Rule 221(b), specifies that a vacancy in the office of trustee during a case does not abate any pending action or pro- ceeding. The successor trustee, when selected and qualified, is substituted as a party in any pending ac- tion or proceeding. § 326. Limitation on compensation of trustee (a) In a case under chapter 7 or 11, other than a case under subchapter V of chapter 11, the court may allow reasonable compensation under section 330 of this title of the trustee for the trustee’s services, payable after the trustee ren- ders such services, not to exceed 25 percent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable com- pensation not to exceed 3 percent of such mon- eys in excess of $1,000,000, upon all moneys dis- bursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims. (b) In a case under subchapter V of chapter 11 or chapter 12 or 13 of this title, the court may not allow compensation for services or reim- bursement of expenses of the United States trustee or of a standing trustee appointed under section 586(b) of title 28, but may allow reason- able compensation under section 330 of this title of a trustee appointed under section 1202(a) or 1302(a) of this title for the trustee’s services, payable after the trustee renders such services, not to exceed five percent upon all payments under the plan. (c) If more than one person serves as trustee in the case, the aggregate compensation of such persons for such service may not exceed the maximum compensation prescribed for a single trustee by subsection (a) or (b) of this section, as the case may be. (d) The court may deny allowance of com- pensation for services or reimbursement of ex- penses of the trustee if the trustee failed to make diligent inquiry into facts that would per- mit denial of allowance under section 328(c) of this title or, with knowledge of such facts, em- ployed a professional person under section 327 of this title. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2562; Pub. L. 98–353, title III, § 430(a), (b), July 10, 1984, 98 Stat. 369; Pub. L. 99–554, title II, § 209, Oct. 27, 1986, 100 Stat. 3098; Pub. L. 103–394, title I, § 107, Oct. 22, 1994, 108 Stat. 4111; Pub. L. 116–54, § 4(a)(4), Aug. 23, 2019, 133 Stat. 1085.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 326(a) of the House amendment modifies a provision as contained in H.R. 8200 as passed by the House. The percentage limitation on the fees of a trust- ee contained in the House bill is retained, but no addi- tional percentage is specified for cases in which a trust- ee operates the business of the debtor. Section 326(b) of the Senate amendment is deleted as an unnecessary re- statement of the limitation contained in section 326(a) as modified. The provision contained in section 326(a) of the Senate amendment authorizing a trustee to re- ceive a maximum fee of $150 regardless of the avail- ability of assets in the estate is deleted. It will not be necessary in view of the increase in section 326(a) and the doubling of the minimum fee as provided in section 330(b). Section 326(b) of the House amendment derives from section 326(c) of H.R. 8200 as passed by the House. It is a conforming amendment to indicate a change with re- spect to the selection of a trustee in a chapter 13 case under section 1302(a) of title 11. SENATE REPORT NO. 95–989 This section is derived in part from section 48c of the Bankruptcy Act [section 76(c) of former title 11]. It must be emphasized that this section does not author- ize compensation of trustees. This section simply fixes the maximum compensation of a trustee. Proposed 11 U.S.C. 330 authorizes and fixes the standard of com- pensation. Under section 48c of current law, the max- imum limits have tended to become minimums in many cases. This section is not intended to be so inter- preted. The limits in this section, together with the limitations found in section 330, are to be applied as outer limits, and not as grants or entitlements to the maximum fees specified. The maximum fee schedule is derived from section 48c(1) of the present act [section 76(c)(1) of former title 11], but with a change relating to the bases on which the percentage maxima are computed. The maximum fee schedule is based on decreasing percentages of in- creasing amounts. The amounts are the amounts of money distributed by the trustee to parties in interest, excluding the debtor, but including secured creditors. These amounts were last amended in 1952. Since then, the cost of living has approximately doubled. Thus, the bases were doubled. It should be noted that the bases on which the max- imum fee is computed includes moneys turned over to secured creditors, to cover the situation where the trustee liquidates property subject to a lien and dis- tributes the proceeds. It does not cover cases in which the trustee simply turns over the property to the se- cured creditor, nor where the trustee abandons the property and the secured creditor is permitted to fore- close. The provision is also subject to the rights of the secured creditor generally under proposed section 506, especially 506(c). The $150 discretionary fee provision of current law is retained. Subsection (b) of this section entitles an operating trustee to a reasonable fee, without any limitation based on the maximum provided for a liquidating trust- ee as in current law, Bankruptcy Act § 48c(2) [section 76(c)(2) of former title 11]. Subsection (c) [enacted as (b)] permits a maximum fee of five percent on all payments to creditors under a chapter 13 plan to the trustee appointed in the case. Subsection (d) [enacted as (c)] provides a limitation not found in current law. Even if more than one trustee serves in the case, the maximum fee payable to all trustees does not change. For example, if an interim trustee is appointed and an elected trustee replaces Page 55 TITLE 11—BANKRUPTCY § 327 him, the combined total of the fees payable to the in- terim trustee and the permanent trustee may not ex- ceed the amount specified in this section. Under cur- rent law, very often a receiver receives a full fee and a subsequent trustee also receives a full fee. The result- ant ‘‘double-dipping’’, especially in cases in which the receiver and the trustee are the same individual, is det- rimental to the interests of creditors, by needlessly in- creasing the cost of administering bankruptcy estates. Subsection (e) [enacted as (d)] permits the court to deny compensation to a trustee if the trustee has been derelict in his duty by employing counsel, who is not disinterested. Editorial Notes AMENDMENTS 2019—Subsec. (a). Pub. L. 116–54, § 4(a)(4)(A), inserted ‘‘, other than a case under subchapter V of chapter 11’’ after ‘‘7 or 11’’. Subsec. (b). Pub. L. 116–54, § 4(a)(4)(B), inserted ‘‘sub- chapter V of chapter 11 or’’ after ‘‘In a case under’’. 1994—Subsec. (a). Pub. L. 103–394 substituted ‘‘25 per- cent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable compensation not to exceed 3 percent of such moneys in excess of $1,000,000’’ for ‘‘fifteen percent on the first $1,000 or less, six per- cent on any amount in excess of $1,000 but not in excess of $3,000, and three percent on any amount in excess of $3,000’’. 1986—Subsec. (b). Pub. L. 99–554 amended subsec. (b) generally, substituting ‘‘under chapter 12 or 13 of this title’’ for ‘‘under chapter 13 of this title’’, ‘‘expenses of the United States trustee or of a standing trustee ap- pointed under section 586(b) of title 28’’ for ‘‘expenses of a standing trustee appointed under section 1302(d) of this title’’, and ‘‘under section 1202(a) or 1302(a) of this title’’ for ‘‘under section 1302(a) of this title’’. 1984—Subsec. (a). Pub. L. 98–353, § 430(a), substituted ‘‘and three percent on any amount in excess of $3000’’ for ‘‘three percent on any amount in excess of $3,000 but not in excess of $20,000, two percent on any amount in excess of $20,000 but not in excess of $50,000, and one percent on any amount in excess of $50,000’’. Subsec. (d). Pub. L. 98–353, § 430(b), amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: ‘‘The court may deny allowance of compensa- tion for services and reimbursement of expenses of the trustee if the trustee— ‘‘(1) failed to make diligent inquiry into facts that would permit denial of allowance under section 328(c) of this title; or ‘‘(2) with knowledge of such facts, employed a pro- fessional person under section 327 of this title.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2019 AMENDMENT Amendment by Pub. L. 116–54 effective 180 days after Aug. 23, 2019, see section 5 of Pub. L. 116–54, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1994 AMENDMENT Amendment by Pub. L. 103–394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103–394, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99–554 dependent upon the judicial district in- volved, see section 302(d), (e) of Pub. L. 99–554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title. REFERENCES IN SUBSECTION (b) TEMPORARILY DEEMED TO INCLUDE ADDITIONAL REFERENCES Until the amendments made by subtitle A (§§ 201 to 231) of title II of Pub. L. 99–554 become effective in a district and apply to a case, for purposes of such case any reference in subsec. (b) of this section— (1) to chapter 13 of this title is deemed to be a ref- erence to chapter 12 or 13 of this title, (2) to section 1302(d) of this title is deemed to be a reference to section 1302(d) of this title or section 586(b) of Title 28, Judiciary and Judicial Procedure, and (3) to section 1302(a) of this title is deemed to be a reference to section 1202(a) or 1302(a) of this title, see section 302(c)(3)(A), (d), (e) of Pub. L. 99–554, set out in an Effective Date of 1986 Amendment; Transition and Administrative Provisions note under section 581 of Title 28. § 327. Employment of professional persons (a) Except as otherwise provided in this sec- tion, the trustee, with the court’s approval, may employ one or more attorneys, accountants, ap- praisers, auctioneers, or other professional per- sons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in car- rying out the trustee’s duties under this title. (b) If the trustee is authorized to operate the business of the debtor under section 721, 1202, or 1108 of this title, and if the debtor has regularly employed attorneys, accountants, or other pro- fessional persons on salary, the trustee may re- tain or replace such professional persons if nec- essary in the operation of such business. (c) In a case under chapter 7, 12, or 11 of this title, a person is not disqualified for employ- ment under this section solely because of such person’s employment by or representation of a creditor, unless there is objection by another creditor or the United States trustee, in which case the court shall disapprove such employ- ment if there is an actual conflict of interest. (d) The court may authorize the trustee to act as attorney or accountant for the estate if such authorization is in the best interest of the es- tate. (e) The trustee, with the court’s approval, may employ, for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debt- or, if in the best interest of the estate, and if such attorney does not represent or hold any in- terest adverse to the debtor or to the estate with respect to the matter on which such attor- ney is to be employed. (f) The trustee may not employ a person that has served as an examiner in the case. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2563; Pub. L. 98–353, title III, § 430(c), July 10, 1984, 98 Stat. 370; Pub. L. 99–554, title II, §§ 210, 257(e), Oct. 27, 1986, 100 Stat. 3099, 3114.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 327(a) of the House amendment contains a technical amendment indicating that attorneys, and perhaps other officers enumerated therein, represent, rather than assist, the trustee in carrying out the trustee’s duties.