Bankruptcy Professional Fees:

Guidelines for Reviewing Fee Applications

GGD-95-36FS: Published: Mar 6, 1995. Publicly Released: Mar 6, 1995.

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Pursuant to a congressional request, GAO provided information on the guidelines the Assistant U.S. Trustees (AUST) used to assess the reasonableness of bankruptcy attorneys' and other legal professionals' fee requests.

GAO found that: (1) of the 97 AUST surveyed, one-third had written AUST guidelines, one-half had written judicial directives regarding professional fees, and two-thirds had unwritten guidelines governing fee applications; (2) many of the AUST with trustee guidelines or judicial directives had guidelines specific to chapter 11 bankruptcy cases; (3) nearly two-fifths of the AUST with unwritten judicial guidelines had guidelines applicable to chapter 11 cases; (4) the written guidelines or directives AUST used most often in chapter 11 cases addressed professional fee application formats and lodestar formulas; (5) the unwritten guidelines AUST used in chapter 11 cases were related to holdbacks and the lodestar formula; (6) the Office of U.S. Trustees (OUST) objected to most chapter 11 fee applications because the attorneys did not adequately describe their work or itemize each task; (7) OUST objected most frequently to applications submitted by debtor attorneys; (8) OUST objected to chapter 11 fee applications more frequently, held pre-fee hearing consultations less frequently, and devoted more staff to reviewing fee applications than offices with no guidelines; (9) bankruptcy judges awarded private trustees in chapter 7 cases the statutory maximum compensation permitted in 81 percent of the cases; and (10) although excessive paperwork was the main reason private trustees voluntarily left their positions, challenging work and a dependable source of income were the most important reasons private trustees remained in their positions.

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