Bankruptcy trustees are allowed to hire an attorney to represent them. Since many trustees are also lawyers, they hire themselves in cases where litigation is required. Bankruptcy trustees, that are also lawyers, also practice bankruptcy law privately. As lawyers in private practice, they establish hourly fees. As trustees/attorneys, they charge "reasonable" rates against bankruptcy estates. The "reasonable" rates are based on what lawyers charge in the private sector. It can be said, therefore, that bankruptcy trustees practicing bankruptcy law in the private sector establish fee standards that they benefit from in bankruptcy cases.

11 U.S.C. Sec 326 limits compensation to trustees. That section refers to other sections and "reasonable" fees. 11 U.S.C. Sec 503 is another compensation section that allows "reasonable" fees to professionals, including lawyers. To get a handle on what is "reasonable," it is necessary to look at Applications to Hire Attorney for Trustee filed in Chapter 7 bankruptcy cases by trustees/attorneys. It is clear from such Applications that lawyers qualify their hourly fees based on the geographical average and type of service.

An attorney for the trustee does not base their hourly fees on the type of service for an attorney that practices real estate law, divorce, probate, criminal defense, etc. It is an established fact that law is specialized. A person needing a will does not retain an attorney that practices criminal defense law. A person seeking a divorce does not retain an attorney that practices work-related injury lawsuits.

The government, and many companies in the private sector, have numerous classifications for clerical personnel. Typists are classified according to the type of work that is delegated to them and their experience. These classifications range from entry-level clerk-typists to administrative assistant and executive assistant. Typists that prepare documents with columns containing numbers are classified as statistical typists, and anyone that has worked in an office knows that you don't delegate statistical typing to a clerk-typist. Lawyers also have classifications for clerical personnel that they hire. Lawyers hire legal secretaries to prepare legal documents. They hire paralegals to perform research and some also prepare legal documents. The lawyer doesn't hire a billing clerk and delegate the typing of legal documents or research into case law.

If lawyers will not hire clerk-typists to type the documents they present in court, why then do U.S. Trustees expect the public to hire clerk-typists to type documents that are official, legal and binding documents when petitioning for bankruptcy?

When it comes to bankruptcy petition preparers, U.S. Trustees do not allow the same standards that lawyers, the government, and the private sector use to qualify and classify employees based on skills and experience. They classify all petition preparers as clerk-typists. The U.S. Trustee Program will have the public to believe that it doesn't take knowledge and typing skills to prepare a bankruptcy petition. The same personnel, however, have initiated a program to hold lawyers more accountable for shabby bankruptcy petitions. If lawyers file shabby petitions, including incorrect, or missing information, why then does the U.S. Trustee Program expect perfection from bankruptcy petition preparers?

Numerous cases filed by U.S. Trustees against bankruptcy petition preparers allege overcharging their clients. On what basis, what scale, do U.S. Trustees reach this determination? In the Northern District of Illinois, the attorney for U.S. Trustee Ira Bodenstein initiated the help of a paralegal from his office. She contacted typing services that are located approximately 50 miles from the federal courthouse for the division. Having the typing service type bankruptcy schedules, she then used the amount of time it took along with their hourly fee to determine what is "reasonable."

This presents a problem. Typing services that do not specialize in preparing court documents are not equipped with computer software programs that print out information on forms. This automatically reduces the overhead expense for general typing services. With a $500 or less expensive typewriter, the typist puts the schedules in the manual operation, sets tabs, and proceeds to type. Correcting typos depends on the typewriter -- it is not necessary to use another sheet of paper from scratch. In addition, customers are responsible for providing the bankruptcy "kit" at their own expense. WALLA! Instant savings from overhead!

U.S. Trustees have desperately attempted to classify bankruptcy petition preparers as clerk-typists. They do not want to upgrade the classification to statistical typists. They do not want to upgrade the classification to legal secretarial. U.S. Trustees totally refuse to recognize these businesses as professionally operated companies. According to one attorney for a document preparation franchise, the attorney for U.S. Trustee Ira Bodenstein used fees charges by typists working out of their homes to determine "reasonable" fees for court document businesses with offices.

There is also a question as to why U.S. Trustees do not poll independent paralegals, or those companies classified as court document preparation services, to ascertain reasonable fees within the same industry. Surely, they would not go to a lawyer specializing in work related injuries to determine reasonable fees for lawyers practicing bankruptcy law. In addition, the fees for lawyers practicing bankruptcy are just as diversified as areas of law. Based on fee schedules filed in cases in the Northern District of Illinois, a lawyer might charge $700 to file a no-asset Chapter 7 case; $1,200 to file an asset Chapter 7 case; $2,000 to file a Chapter 7 case for a corporation; and $1,500 to file a Chapter 13 case. There is no reason to believe that this same diversification does not exist across America.

U.S. Trustees want petition preparers to charge a flat hourly rate, and some, a flat rate period. They use the decisions of bankruptcy judges no matter what state, to argue reasonable fees in other states. They do not use this same standard to determine reasonable lawyer fees across state lines. It is highly doubtful that a bankruptcy trustee will compare lawyer fees in Illinois to lawyers' fees in Hawaii to determine which fee is excessive.

The problem is not with what petition preparers charge. The problem is that the U.S. Trustee Program does not want competition with lawyers. This isn't limited to how many customers lawyers lose to petition preparers. There's an underlying motive that is not clear to the public in general. It takes knowledge of the history of the U.S. Trustee Program and "bankruptcy rings" to understand why the U.S. Trustee Program NEEDS the public to depend on bankruptcy attorneys. (More on this in "Intentional Targets.")

While lawyers justify the rate variation based on the number of forms or amount of time to prepare them, non-lawyers are not provided the same consideration. Therefore, petition preparers are forced to charge the same rate to customers with several pages of creditors and assets that they charge to a customer that has few creditors and no assets. U.S. Trustees have argued the justification in rate differences for lawyers by taking into consideration that it takes more time to prepare a petition for clients with assets and numerous creditors than it does for clients with few creditors and no assets. They do not allow the same standard for petition preparers.

U.S. Trustees establish the false premise that petition preparers do not have to invest time into helping their customers, because they cannot provide legal advice. It's not the legal advice or lack thereof that should establish fees for document preparers. Lawyers bill for telephone calls, and they do so at their regular hourly rate and not based on the charges billed by the telephone company. If the lawyer sets an appointment for 3 p.m., and the client doesn't show up until 3:15 p.m., you can bet that the lawyer is running the clock from 3 p.m. because that time was set-aside for that client.

Bankruptcy petition preparers are not afforded the same consideration. U.S. Trustees only want to present how long it takes to type a petition on a typewriter. They deny these private businesses consideration of expenses in telephone calls, and appointments that set-aside time specifically for that customer. Even with the web based services, someone has to pay for the server, internet service provider, cable or phone line, and a host of other costs associated with operating a web based business.

U.S. Trustees are completely out of line, and completely in violation of anti-trust laws, when they price-fix what any privately owned business can charge. Excessive fees are determined based on what other companies providing the same service charge. In a competitive market, in a democratic society, the public has choices. The public knows that if a long distance telephone service charges 10 cents a minute and another charges 7 cents a minute, that the rates are competitive. The public then compares what comes with the 10 cents a minute that doesn't come with the 7 cents a minute service. They can then make an informed choice. The public is not as helpless and stupid as U.S. Trustees imply.