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Bankruptcy Fee Hike Policy Challenged

If you own a company and have had to file for bankruptcy from 2017-2019, you maybe be interested to know that a court case has been filed against the fees implemented by the federal government. These extreme fee hikes are in effect in every state except Alabama and North Carolina, which may strengthen the unconstitutional label the court case is trying to attach to the federal government’s actions.

Relevant Case Details

  • A loophole in federal law makes filing bankruptcy for companies in Alabama and North Carolina cheaper than any other state.

  • In 2017, the US government increased fees for large companies filing Chapter 11 bankruptcy by over 700 percent in all states except Alabama and North Carolina.

  • The court case is seeking to be classified as a class-action lawsuit with up to 1000 members.

  • The lawyer who filed the suit is claiming that a $155 million-dollar discrepancy exists from 2018 because of the fee hikes.

  • The Acadiana Management Group, LLC is the lead plaintiff in the lawsuit, claiming $216,000 in excessive fees.

The Trustee Program, the unit of the Department of Justice that is funded by these fees, says the quarterly bankruptcy fee increase was necessary to keep their offices funded and running. They claim the need arose from the overall decrease in bankruptcy filings. This claim is based on the 2019 fiscal year budget the Trustee Program submitted to Congress.

Breakdown of the Fee Hike

All of the following information is according to the DOJ website.

The fees before the 2017 hikes were on a sliding scale. This schedule fee was a minimum of $325 for disbursements by the debtor up to $14,999, and a maximum $30,000 for amounts over $30 million.

After the increase, the schedule changed such that debtors are charged a 1% fee, not to exceed $250,000, for any disbursements greater than or equal to $1 million.

This change resulted in a considerable increase to debtors who were already having trouble with the solvency of their companies. If they could not pay these massive increases, they could wind up with their cases dismissed or converted to a liquidation.

Importance of this Case

Though in its early stages, this case could set a precedent for inequality in a state-to-state bankruptcy fee hike policy if won. Alternatively, if lost, the ruling would support the ability of the government to make extreme fee hikes in the cause of maintaining department funding and functionality.

Make sure to follow this case, especially if you have been affected by the substantial bankruptcy fee hikes since 2017.

If you are considering bankruptcy as a debt relief option, you need the assistance of a skilled and licensed attorney.  Elias Dsouza of Dsouza and Strachan Lawgroup Group has been helping people navigate this complex topic for over 15 years.  Contact Elias today for a free consultation.

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