Here’s a shock: when you ask someone to do something for you, they usually charge you money. When that someone is a federal court and the something is accepting a document for filing, the charge usually comes in the form of a filing fee.
The United States Courts website maintain a list of fees chargeable in bankruptcy, as authorized by a federal statute. The court will charge fees for filing bankruptcy cases, converting a case from one chapter to another, filing complaints, motions for relief from the automatic stay and notices of appeal. Usually, anytime a filing requires court personnel to do something (issue summons, send notice, etc.) there’s going to be a charge.
The Judicial Conference of the United States has just added a $25 fee for transferring a claim in bankruptcy. This new fee eliminates a freebie that claims speculators used to enjoy, but certainly added to the labor burden of bankruptcy courts.
The procedure for transferring a claim is supposed to be easy, and it is: the transferee files a notice of transfer after a claim is filed. The Notice identifies the claim number, the name of the transferor and the name and address of the transferee. There is a space on the form for the last 4 digits of the claim identifier for the transferor and the transferee. The transferee signs the form and submits it to the court. It’s that easy.
Once received, the court staff will pull up the claim to be transferred, which contains the address of the transferor, and send a notice that the rights under the filed claim are shifting to the transferee. If the transferor doesn’t object within 21 days then the transfer will be completed.
Trading in bankruptcy claims has become big business. According to SecondMarket, a marketplace for private shares, there were 1,237 trades valued at $4.9 billion in December 2012. Although these were dominated by claims traded in the Lehman Brother and MF Global cases, approximately $40 billion in claims were traded by the top 500 cases in 2012.
A recent blog by the NY Times suggests that the new $25 filing fee for trading claims is a sort of Tobin Tax imposed on the trades. According to Investopedia a Tobin Tax is
A means of taxing spot currency conversions that was originally suggested by American economist James Tobin (1918-2002). The Tobin tax was developed with the intention of penalizing short-term currency speculation, and to place a tax on all spot conversions of currency. Rather than a consumption tax paid by consumers, the Tobin tax was meant to apply to financial sector participants as a means of controlling the stability of a given country’s currency.
The NY Times blog suggests that the $25 fee will create an inefficiency in the market for trading claims, which is probably true to a certain extent. The fee is a charge that will need to be absorbed by either the buyer or the seller of the claim. However, the comparison to a Tobin Tax misleadingly suggests that the Judicial Conference imposed the new fee to effect a result, one way or another, in the financial markets involved in the claims trading process. However, given that the court staff must research the existing claim and send notice to the transferor the more likely purpose of the $25 fee is to compensate the court for the efforts involved in this process.
