In re: Lashbrook, No. A09-00484-HAR (Bankr. D. Alaska, June 3, 2011).
When can a debtor object to a trustee's fee? In a recent 9th Circuit decision, a bankruptcy court in Alaska denied a debtor's objection to the trustee's fees.
In the case, the debtors argued that, because the distribution of their estate was to pay only $35,000 of the IRS secured debt on their trailer park (out of $50,000), the trustee abjectly failed in his fiduciary duties. They argued that the trustee orchestrated the case to maximize fees and expense of the creditors.
The court held, however, that the trustee had a duty and a right to try to liquidate their trailer park, a duty which the debtors attempted to impede. These impediments increased the trustee's fees rightly. Additionally, the court found the fee amounts appropriate to the circumstances of the case as compared to other cases, and that he did not seem to manipulate the case to increase his fees.
The debtors further argued that the trustee should have been required to submit records of the amount of time he spent on the case in order to justify his fee. The court held that such records are a matter of discretion for the court, and denied the request.
A trustee's fee request should undergo a reasonableness test analyzing a list of factors. The court held that the evidence weighed on the side of the trustee because the debtors were generally ambushing him at every turn. Because the debtors made themselves dislikable to the court, the court was far more scrutinizing of their claims and generous to the trustee. Thus, while it is possible to object to a trustee's performance and fee request, it must be for good cause.
