Does It Matter What the Percentage Fee is for a Chapter 13 Trustee?

The Chapter 13 Trustee gets a fee which is used to pay the expenses of running the Chapter 13 Trustee’s office.  That fee is a certain percentage taken out of almost all of the payments made by the Chapter 13 Trustee to creditors.  The fee is set by the office of the United States Trustee, and is adjusted every so often.  In the Northern District of New York the trustee’s percentage fee was recently increased from around 5 percent to 8.0 percent.

An increase in the percentage fee means that debtors often have to pay more in to their chapter 13 plan in order to cover the increase in the trustee’s fee.  This does not happen in districts in which creditors get paid an undefined pro-rata share of what is available.  But in a district like the Northern District of New York, Chapter 13 plans must pay a minimum percentage to unsecured creditors.  If a Chapter 13 debtor’s plan is scheduled to pay only enough to cover that minimum percentage, the debtor may find that they are short at the end of the plan and may have to fund in additional money to cover the increase in the fee.  In some cases, the Trustee will make a motion to dismiss the case because of this projected shortfall.

I once had a Chapter 13 case in which the debtor had received permission to borrow money from a relative to pay off their plan in full two years earlier than it was scheduled to be completed.  We got the pay-off figure from the Trustee, which the debtor paid.  In the week between our receiving the pay-off figure and the time it was paid, the trustee’s percentage fee went up 3 percent (an end of year adjustment we were told) and because the pay-off was over $50,000, the debtor was told he had to fund in an additional $1,500 to complete his plan and get a discharge.