Trustee Blog

2016(b) Attorney Disclosure

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Chapter 7 Trustee Larry Simons reviews the 2016(b) statement (Disclosure of Compensation of Attorney) that is filed with the court that talks about the amount of attorney fee paid and what if any amount of the attoreny fee is due and owing to the attorney at the time of the filing of the case. The 2016(B) statement from the bankruptcy petition provides:

“Pursuant to 11 U.S.C. § 329(a) and Bankruptcy Rule 2016(b), I certify that I am the attorney for the above-named debtor(s) and that compensation paid to me within one year before the filing of the petition in bankruptcy, or agreed to be paid to me, for services rendered or to be rendered on behalf of the debtor(s) in contemplation of or in connection with the bankruptcy case is as follow:

For legal services, I have agreed to accept_____

Prior to the filing of this statement I have received______

Balance Due_____”

Trustee Simons reviews the statement and will ask the debtor if he owes any money to his attorney. While the 2016(b) statement suggests that an amount may be owed to the attorney at the time of filing, the form does not indicate that the “left over” attorney fee will be discharged and cannot be collected by the attorney from his client.

The attorney becomes a creditor just like any of the client’s other creditors. There is no where in the bankruptcy code that allows a chapter 7 debtor to pay his attorney fee after the filing of the case unless it is done voluntarily.

Trustee Simons will inform the debtor that the amount owed to his attorney is discharged and cannot be collected.  The client is no longer legally obligated to pay his attorney.  Ouch!

Practice Pointer:

Have your client pay all attorneys fee prior to filing the bankruptcy case or the fee will be discharged.

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