Mr. Parris is correct. These fees are not deductible for income tax purposes.
[Putting on my no longer used Administrator’s hat]
To further explain this, the taxpayer received ‘relief’ from various creditor debts for a rather nominal fee when compared to the value of the debts written off. The Trustee’s fees are a part of the bankruptcy proceedings WHILE the debtor is a bankrupt (surplus income calculation); not before the assignment, nor after the discharge. If they were deductible, these fees would be included in the Trustee-filed “In Bankruptcy” return.
From a strictly business accounting standpoint (for tax purposes), if, outside of a bankruptcy, the creditors agreed to write off any portion of the debtor’s payable balances, these amounts would have to be included in the taxpayer’s business income and, as such, taxable income to the taxpayer.