Companies Grapple with Rise in Bankruptcy Fees - ABI

PenAir Chief Operating Officer David Richards thought the $156,215 bankruptcy fee was a mistake. The Anchorage, Alaska, airline had been in bankruptcy since August 2017, paying a quarterly fee of about $20,000 that the Justice Department collects from companies in chapter 11. PenAir was one of the first businesses to feel the effect of an increase in the fees the court system is charging companies for going through the bankruptcy process, WSJ Pro Bankruptcy reported. The quarterly fee is now capped at $250,000; the previous cap was $30,000. Some bankruptcy lawyers and financial advisers say the price increase is pushing the cost of bankruptcy to an unaffordable level for businesses, which already are struggling between reorganization and shutting down. Congress passed the fee increase as part of a disaster-relief spending bill in October, and it affects companies operating under chapter 11 protection that spend more than $1 million a quarter on operating expenses. Companies that spend below that amount would pay a fee of $4,875 or less. The new fee system is set to end in 2022, but it will be reviewed each year. If the trustee program account tops $200 million during an annual check on Sept. 30, the higher fees would be suspended for the next year and the old $30,000 fee cap would apply, until its next annual check.

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