By Brigid K. Ndege (Lewis Brisbois Bisgaard & Smith LLP) and Christian Conway (Clark Hill PLC)

Parties have long questioned whether the existence of two programs—the Bankruptcy Administrator program and the U.S. Trustee program—to administer bankruptcy cases fails to meet the U.S. Constitutional requirement for uniformity in bankruptcy law.  In 2017, an increase in quarterly fees by Congress brought this dormant constitutional issue to the forefront because it illustrated the lack of uniformity between these two programs. After the fee hike, debtors in regions administered by the U.S. Trustee program paid significantly more in quarterly fees than debtors in regions administered by the Bankruptcy Administrator program. The drastic difference in fees for debtors in the two programs resulted in legal challenges to the constitutional uniformity of the fee hike. This eventually led to a circuit split, with the Fifth and Fourth circuits holding that the fee increase was constitutional and the Second and Third circuits holding that the fee increase was not constitutional. Although the U.S. Supreme Court resolved this ensuing circuit split in Siegel v. Fitzgerald, by unanimously holding that the fee hike was unconstitutional, the Court declined to address whether the dual bankruptcy system was constitutional and the appropriate remedy for debtors who paid more fees under the fee increase.

Read the full article here.