UNITED STATES BANKRUPTCY COURT 

FOR THE WESTERN DISTRICT OF PENNSYLVANIA 

 

IN RE : BANKRUPTCY NO. 06-10389 

 : CHAPTER 7 

DONALD W. WARD and JEAN M. : 

WARD, DEBTORS : 

 : 

RICHARD W. ROEDER, ESQ., : DOCUMENT NOS. 48 AND 50 

TRUSTEE, APPLICANT : 

vs. : 

NO RESPONDENT : 

APPEARANCES: 

RICHARD W. ROEDER, ESQ., TITUSVILLE, PA, TRUSTEE AND ATTORNEY 

 PRO SE 

JOHN C. MELARAGNO, ESQ., ERIE, PA, AMICUS BRIEF FOR THE CHAPTER 7 

 PANEL TRUSTEES FOR THE WESTERN DISTRICT OF PA 

JOSEPH S. SISCA, PITTSBURGH, PA, FOR THE UNITED STATES TRUSTEE 

WARREN W. BENTZ, U.S. BANKRUPTCY JUDGE 

APRIL 13, 2007 

OPINION

Donald W. Ward and Jean M. Ward (“Debtors”) filed a voluntary Petition under 

Chapter 7 of the Bankruptcy Code on April 14, 2006. Richard W. Roeder, Esq., was 

appointed and serves as Chapter 7 Trustee (the “Trustee”). The Trustee also serves as 

Attorney Pro Se. 

The assets available for administration by the Trustee in the case consist of an 

income tax refund of $665, a parcel of real estate with building, and certain personal 

property located in the building. A buyer for the real estate was in place at the time of the 

bankruptcy filing. The Trustee promptly filed a Motion for Sale and sold the real estate 

for $105,000. 

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The real estate was encumbered by a first mortgage in the amount of $86,391.79, 

a tax lien, $7,527.19 and real estate taxes, $2,183.06. The net proceeds to the 

bankruptcy estate from the sale of the real estate as stated in the Trustee’s Report of Sale 

were $8,898.01. 

To liquidate the personalty, the Trustee sought Court approval for the engagement 

of an auctioneer and filed a Motion for approval of an expedited sale. The auction 

generated gross proceeds of $13,041.50 and after payment of a fee to the auctioneer and 

for related auction expenses, the net proceeds to the bankruptcy estate were $10,994.15. 

The Trustee has filed his Final Report and Account, an Application for 

Compensation as Trustee, and an Application for Compensation as Attorney Pro Se. The 

Trustee requests compensation as trustee in the amount of $9,188.04 plus $584.66 in 

expenses and compensation as Attorney Pro Se in the amount of $2,199. 

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The Trustee’s Proposed Distribution provides for payments on claims as follows: 

CLASS OF CREDITOR CLAIMED AMOUNT PROPOSED PAYMENT

 

ADMINISTRATIVE: 

 Trustee Roeder’s Trustee Compensation $9,188.04 $9,188.04 

 Trustee Roeder’s Trustee Expenses $584.66 $584.66 

 Richard Roeder, Attorney Pro Se $2,119.00 $2,119.00

 $11,891.70 

PRIORITY: 

 Internal Revenue Service $11,214.59 $5,971.08 

 Department of Labor & Industry $699.25 $372.31 

 PA Department of Revenue $1,648.90 $877.93

 $7,221.32 

GENERAL UNSECURED: 

 No Distribution $0.00 $0.00 

A hearing on the Trustee’s Final Account and Proposed Distribution was held on 

December 4, 2006. The Trustee presented his report to the Court. The Court inquired 

about the reasonableness of the Trustee’s compensation and whether the Trustee had time 

records to support the amount of the request and also as to whether it was appropriate to 

calculate a commission on the total sale price of real estate that is subject to a lien. 

The Trustee posits that 11 U.S.C. § 330(a)(7),1

 which was added to the 

Bankruptcy Code by the Bankruptcy Abuse and Consumer Protection Act of 2005 

(“BAPCPA”), “instruct[s] the courts that the Chapter 7 Trustee’s compensation is to be 

treated as a commission without taking into consideration the reasonableness test of 11 

U.S.C. § 330(a)(3).” The Trustee further posits that 11 U.S.C. § 326 entitles the Trustee 

 

1

 All references to Code sections are to Title 11 of the United States Code unless otherwise indicated. 

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to include payments made to secured creditors as part of the base amount on which the 

Trustee’s fees are calculated. 

The issues have been briefed by the Trustee. We also have the benefit of a 

Memorandum by the United States Trustee and an Amicus Brief by the Chapter 7 Panel 

Trustees for this District, both in support of the Trustee’s position. 

Discussion

1. Payments to Secured Creditors.

Section 326(a) provides that a trustee may receive reasonable compensation 

“upon all monies disbursed or turned over in the case by the trustee to parties in interest, 

excluding the debtor, but including holders of secured claims.” 11 U.S.C. § 326(a). 

(emphasis added). 

The Court of Appeals for the Third Circuit in In Re Lan Associates, 192 F.3d 109 

(3rd Cir. 1999) conducted an analysis of the permissible transactions that would be 

included in the “base” upon which a trustee’s compensation is calculated. The specific 

issue in Lan was whether or not a trustee is entitled to compensation on an undersecured 

creditor’s “credit bid”. The court held that the trustee was not entitled to compensation 

on a credit bid because, in those circumstances, the trustee did not actually administer the 

asset and the funds did not pass through the trustee’s hands. As such, the trustee should 

have abandoned the asset to the undersecured creditor and the trustee was not entitled to 

compensation for the undersecured creditor’s “credit bid”. 

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In reaching that conclusion, the Lan court reviewed the legislative history of 

§§ 326 and 330 and reviewed the general method upon which a trustee’s calculation is 

based and in doing so cited to H.R. Rep. No. 95-595 wherein Congress stated: 

It should be noted that the base on which the maximum 

fee is computed includes moneys turned over to secured 

creditors, to cover the situation where the trustee 

liquidates property subject to a lien and distributes the 

proceeds. It does not cover the cases in which the trustee 

simply turns over the property to the secured creditor, nor 

where the trustee abandons the property and the secured 

creditor is permitted to foreclose. 

In Re Lan at 116 and 117. (emphasis added). 

Accordingly, we hold that the Trustee is entitled to include funds turned over to 

secured creditors in the base upon which his compensation is calculated. 

2. Reasonableness of Trustee’s Compensation.

The Trustee posits that the reasonableness test of § 330(a)(3) is inapplicable. 

Through the BAPCPA, Congress altered § 330(a)(3) which now reads: 

In determining the amount of reasonable compensation to 

be awarded to an examiner, trustee under chapter 11, or 

professional person, the court shall consider the nature, the 

extent, and the value of such services, taking into account 

all relevant factors, including . . . 

11 U.S.C. § 330(a)(3). 

Specifically missing from those persons to who § 330(a)(3) is applicable is a 

Chapter 7 Trustee. 

Section 330(a)(1) provides: 

(a)(1) After notice to the parties in interest and the United 

States Trustee and a hearing, and subject to sections 326, 

328, and 329, the court may award to a trustee, . . . 

 (A) reasonable compensation for actual, necessary 

services rendered by the trustee, . . . 

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 (B) reimbursement for actual, necessary expenses. 

11 U.S.C. § 330(a)(1). 

In addition, through the BAPCPA Congress added new subsection 330(a)(7) 

which provides: 

In determining the amount of reasonable compensation to 

be awarded to a trustee, the court shall treat such 

compensation as a commission, based on Section 326. 

11 U.S.C. § 330(a)(7). (emphasis added). 

Section 326(a) was not changed in the BAPCPA. It provides: 

§ 326. Limitation on compensation of trustee 

 (a) In a case under Chapter 7 or 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 renders 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 compensation not to exceed 3 

percent of such moneys in excess of $1,000,000, upon all 

moneys disbursed or turned over in the case by the trustee 

to parties in interest, excluding the debtor, but including 

holders of secured claims. 

11 U.S.C. § 326(a). (emphasis added). 

Sections 330(a)(1), 330(a)(7) and 326(a) govern the bankruptcy court’s analysis 

of the fee request by the Trustee. Section 330(a)(1) permits the court to award a 

reasonable compensation to the trustee for the trustee’s services. 

The language of § 326(a) continues to set forth the maximum compensation 

payable to a Chapter 7 trustee. 

Courts have emphasized repeatedly that a trustee is not 

entitled to the maximum fee allowed under § 326(a); “[t]he 

maximum compensation allowable under § 326(a) is 

awarded to a . . . trustee only in cases in which the result 

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obtained and the benefit realized by the estate are 

exemplary.” Narragansett Clothing, 210 B.R. at 496; see 

also Biskup, 236 B.R. at 336 (“The language of § 326 is 

permissive rather than mandatory in that it fixes the 

maximum compensation of a trustee, and it is not to be 

construed as an entitlement to the maximum fee 

specified.”); In re Guyana Dev. Corp., 201 B.R. 462, 474 

(Bankr. S.D. Tex. 1996) (same); H.R. REP. NO. 95-595, at 

329 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6286 

(“Section 330 authorizes compensation for services and 

reimbursement of expenses of officers of the estate . . .. 

[T]he compensation allowable under this section is subject 

to the maxima set out in section [ ] 326.”). 

In Re Lan Associates, 192 F.3d. 109, 115-16 (3d. Cir. 1999). 

Section 326(a) establishes a maximum compensation amount, not an entitlement. 

Under both § 330(a)(1) and § 326, the bankruptcy court has to consider the 

reasonableness of fees requested in ruling on a fee application of a Chapter 7 trustee. 

The impact of § 330(a)(7) upon the reasonableness analysis was addressed by the 

Bankruptcy Court in the case of In Re Clemens, 349 B.R. 725 (Bankr. D. UT, 2006). In 

Clemens, as in this case, the trustee argued that amended § 330(a)(3) and new § 330(a)(7) 

meant that the trustee was entitled to the maximum compensation under § 326 without 

submitting billing records. The court in Clemens discussed the impact of § 330(a)(7): 

2. The Impact of Section 330(a)(7): 

The chapter 7 Trustee points to § 330(a)(7), arguing that 

this addition to the Code requires the Court to treat his fees 

as reasonable, so long as the fees are calculated pursuant to 

§ 326. Section 330(a)(7), added to the Code through 

BAPCPA, states: “In determining the amount of 

reasonable compensation to be awarded to a trustee, the 

court shall treat such compensation as a commission, 

based on section 326.” 

Read literally, § 330(a)(7) adds little to the inquiry required 

by § 330(a). The subsection begins by referring to the 

Court’s determination of “the amount of reasonable 

compensation to be awarded to the trustee.” As discussed 

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above ‘reasonable compensation’ is a subjective amount 

which requires the court’s review under § 330(a)(1) and the 

Lodestar approach. Thus, it means very little to call this 

compensation a ‘commission.’ The Court still needs to 

determine the amount of that ‘commission’ and should do 

so by applying the Lodestar approach for deciding 

reasonableness. 

The only significant portion of § 330(a)(7) seems to be the 

last four words: “based on section 326.” Section 326(a) 

provides a mathematical calculation based on the amounts 

disbursed or turned over by a chapter 7 or chapter 11 

Trustee. It provides that a court’s award of “reasonable 

compensation under section 330” may not exceed this 

number (the “statutory cap”). Before the BAPCPA, courts 

would generally determine the amount of a trustee’s 

“reasonable compensation” under § 330(a) and then ask if 

such “reasonable compensation” was greater than the 

statutory cap decided by § 326(a). If that compensation 

was above the statutory cap, the trustee could only be 

awarded the amount calculated under § 326. The 

provisions of § 326 were not a part of the Court’s Lodestar 

analysis, nor were they a part of the Court’s analysis under 

§ 330(a)(3). 

A literal reading of § 330(a)(7) instructs the Court to 

consider the provisions of § 326 “[i]n determining the 

amount of reasonable compensation to be awarded to a 

trustee.” Thus, the plain meaning of § 330(a)(7) requires 

the Court to consider the provisions of § 326 as a part of its 

reasonableness inquiry. In essence, the addition of 

§ 330(a)(7) to the Code serves to now supplement the 

Court’s Lodestar analysis. 

The Court is aware that its holding may mean that the terms 

of § 330(a)(7) have a small impact on pre-BAPCPA 

practice in awarding Trustees fees. To some extent this 

might conflict with the general rule of statutory 

interpretation that a Court should avoid surplusage. 

Nevertheless, the Supreme Court has made clear that the 

Court’s primary duty must be to honor the plain meaning of 

the Code. The Court should only attempt to avoid 

surplusage where the plain meaning of the Code is not 

apparent. The Court concludes that the meaning of 

§ 330(a)(7) is plain, both on its face and when read in 

conjunction with §§ 330(a)(1) and (a)(3). 

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At the same time, it is also important to note that the 

Court’s holding does have an impact on its analysis of 

Trustees fees under § 330(a). Consider a Trustee who 

presents an itemization of fees which supports an award far 

less than the statutory cap under § 326(a). Under preBAPCPA law, the Court would have determined the 

amount of the trustee’s reasonable fee, and then asked 

whether that amount was prohibited by the statutory cap 

under § 326(a). Under the Court’s holding in this case, 

however, the Court must now determine reasonableness 

with an eye on the statutory cap. Thus, the Court might 

easily conclude that although the Trustee’s itemization 

supports a much lower award, the Trustee is entitled to a 

higher amount in light of its consideration for § 326(a) as 

part of its reasonableness determination. To this extent, the 

Court believes its interpretation of the recent changes to 

§ 330(a)(7) does recognize a change to the Bankruptcy 

Code. 

3. Resulting Interpretation 

In sum, the Court concludes that the plain language of 

§ 330(a) still requires the Court to consider the 

reasonableness of a trustee’s compensation. The Court 

must still apply the Lodestar analysis in reviewing 

chapter 7 trustee compensation but must now supplement 

that analysis with a consideration for the provisions of 

§ 326. 

In Re Clemens, 349 B.R. at 730-32. (footnotes omitted). 

Collier’s on Bankruptcy describes the change in the Code as follows: 

New section 330(a)(7) changes current law by providing 

that the compensation of a trustee is to be treated as a 

commission, based on the formulae in section 326(a). The 

primary effect of the change should be that, in the majority 

of cases, a trustee’s allowed fee will presumptively be the 

statutory commission amount. 

Nevertheless, labeling the trustee’s fee as a commission 

does not avoid the requirement that the court also 

determine that the fee is “reasonable.” The 2005 Act does 

not alter the provision in section 330(a)(1)(A) that limits a 

trustee to “reasonable” compensation. Moreover, still 

applicable is the prohibition, set forth in section 330(a)(4), 

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on allowance of compensation for unnecessary duplication 

of services, and services that were not reasonably likely to 

benefit the estate or necessary to the administration of the 

case. Accordingly, courts will continue both to test the 

reasonableness of a trustee’s fee, and to ensure that there is 

not compensation for prohibited services. 

“Commission” is not a defined term under the Bankruptcy 

Code. Yet courts have had occasion to consider 

commission-based compensation awards in the context of 

real estate brokers. In some such cases, courts have not 

awarded the entire commission based fee, depending on the 

circumstances of the case. 

Courts may be expected to continue to assess the 

reasonableness of a trustee’s fee and award a fee that is less 

than the statutory commission in light of the effort 

expended or results obtained. For example, duplicative 

services, unnecessary services or nonbeneficial services 

should continue, as under present law, to be excluded from 

an award of compensation as not reasonable, even if the 

result is an award that is less than the statutory commission. 

Similarly, there may be cases where the amount of 

“moneys disbursed” by the trustee may be very high in 

relation to the services performed, presenting a risk that a 

trustee may be overcompensated by applying the 

commission percentage. Chapter 7 cases filed with a 

significant amount of money in existing bank accounts, or 

cases where the trustee has operated the business for a 

period of time, or other cases where there are significant 

disbursements without a proportionate effort by the trustee, 

are examples of cases where the commission fee may not 

be reasonable. In such cases, even if all the services were 

properly performed, courts will need to assess whether the 

implied hourly rate is so high as to render the fee not 

reasonable. 

For these reasons, it will continue to be necessary for 

trustees to present detailed fee applications, including a 

schedule of the number of hours spent, daily time records 

supporting the time spent and a narrative of the trustee’s 

role and accomplishments supporting the compensation 

award. 

L. King, Collier on Bankruptcy, ¶330.03 [1][a] at p. 330-15 – 330-16 (15th ed. rev’d. 2006) 

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Conclusion

We are directed to assess the reasonableness of the Trustee’s application for 

compensation. The Trustee in this case processed a sale of real estate that was arranged 

prior to the bankruptcy filing, engaged an auctioneer to liquidate personalty and received 

the Debtors’ tax refund. For these services, the Trustee requests the maximum 

commission allowable under § 326, which results in a Trustee’s commission of 

$9,188.64. 

On the record before us, it appears that while there are significant disbursements 

in this case, the proportionate efforts of the Trustee do not warrant a fee of $9,188.64 for 

the Trustee’s services in this case. 

Were the Court considering an appropriate fee on the basis of an hourly fee for 

services performed (typical Lodestar analysis), it would appear that a fee in the $2,000 

range would be appropriate. Even under such an analysis, the Court has always 

recognized that the trustees often perform services in cases where they end up with an 

estate of little or no value and receive little or no compensation, and therefore, been 

liberal in awarding trustee fees. 

The Court proposes to allow Trustee Compensation in the amount of $5,000, plus 

reimbursement of expenses in the amount of $584.66 and an allowance as compensation 

as Attorney Pro Se in the amount of $2,119.00. The Trustee will be given an opportunity 

to request an evidentiary hearing. An appropriate Order will be entered. 

 /s/ Warren W. Bentz 

 Warren W. Bentz 

 United States Bankruptcy Judge 

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UNITED STATES BANKRUPTCY COURT 

FOR THE WESTERN DISTRICT OF PENNSYLVANIA 

 

IN RE : BANKRUPTCY NO. 06-10389 

 : CHAPTER 7 

DONALD W. WARD and JEAN M. : 

WARD, DEBTORS : 

 : 

RICHARD W. ROEDER, ESQ., : DOCUMENT NOS. 48 AND 50 

TRUSTEE, APPLICANT : 

vs. : 

NO RESPONDENT : 

ORDER

This 13th day of April, 2007, in accordance with the accompanying Opinion, it 

shall be and hereby is, ORDERED as follows: 

1. The Court proposes to enter an Order which allows Trustee compensation 

of $5,000, plus reimbursement of expenses in the amount of $584.66 and an allowance of 

the Trustee’s Attorneys’ fees in the amount of $2,119.00. 

2. The Trustee shall have 10 days to request an evidentiary hearing on the 

reasonableness of such fees, in default of which the proposed order will be entered. 

 /s/ Warren W. Bentz 

 Warren W. Bentz 

 United States Bankruptcy Judge 

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