Trump Proposes Raising Fees On Those Filing For Bankruptcy Protection

Bankruptcy Lawyer Bryan W. Stone answers the question: “What is Chapter 11 Bankruptcy?”


Though he may wish it weren’t so, the reality is that one of the many things President Trump is known for is the comfort and frequency with which he avails himself of the country’s bankruptcy system. Having filed for corporate bankruptcy protection multiple times (though there’s some dispute, most experts peg the number at 6), Trump certainly knows his way around the Bankruptcy Code. Given his penchant for filing for bankruptcy protection, many have been surprised that one of increases in his recently proposed budget targets others who seek to do the same by increasing bankruptcy filing fees.


Rising-levels-on-chart-300x211According to the White House budget blueprint, which was released last week, the U.S. Trustee Program will aim to increase bankruptcy filing fees. The goal of the increase, at least as explained in the budget blueprint, is to guarantee that those people or entities who make use of the bankruptcy system are the one that pay for its oversight and upkeep. The budget plans on using these new fees to raise an additional $150 million in revenue in 2017 and $289 million in 2018, a rather dramatic increase in such a short amount of time.


Before ordinary people go getting worked up, let’s make clear that the proposal would not impact the majority of filers. Instead, the fee increases would be aimed only at Chapter 11 bankruptcies. The proposal would change what is currently a quarterly fixed-amount fee to a percentage-based fee. The people who will feel the pinch most are likely to be bigger businesses or at least those with bigger amounts of debt. The increase in fees will target those who make the largest disbursements each quarter.


Unlike Chapter 7 or Chapter 13 bankruptcy cases where filers pay fees once at the beginning of the case, those involved in Chapter 11 bankruptcies pay fees multiple times: once at the beginning of the case and then again every quarter. The amount paid each quarter varies based on the amount the debtor spends. Currently, the most a debtor can owe is a flat $30,000 per quarter for those with the highest quarterly disbursements (more than $30 million). Under Trump’s plan, this $30,000 will disappear and be increased 8 times, up to $250,000 per quarter.


One benefit of the massive increase is that it would encourage filers to move quickly to resolve their cases. The longer the case drags on and clogs up the bankruptcy courts, the longer those quarterly fees will need to be paid. By upping the costs, the hope is that big companies hurry up and clear out of the way in an attempt to minimize their financial penalties.


One group that isn’t thrilled with the news is creditors. Experts say that while the increased fee might help push cases along more quickly, the downside is that it also leaves less money left over to be distributed. If companies are taking already limited resources and paying vastly more money out in fees to the bankruptcy system, that means less money left over to spread among the creditors.


If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.





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