Trustee Blog

Fee Integrity

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Build your Bankruptcy Practice Newsletter #10

Our friend Attorney Melissa Raskey of Hemet, CA sent me a note last week:

 “One thing I wouldn’t mind you commenting on is this. I have lost 2 clients lately bc they think I am lying when I tell them I can’t collect my fees after I file in Chapter 7. They always say, “well Joe down the street says if I pay him the filing fee he will file and I can make payments.” I proceed to tell them to google “Can my chapter 7 bankruptcy attorney collect fees after filing.” Although they find out I am not lying I some times lose them bc I had to prove my point.

 I find this very frustrating when so many are willing to lower than standards to get the client.”

 Good Point Melissa! This is fee integrity. First, by taking your fee after the case is filed, the debtor (your client) has no legal obligation to pay you! You are a creditor just like anyone else and cannot do anything to collect the fee due to 11 U.S.C. Section 362. the automatic stay.

 (a) Except as provided in subsection (b) of this section, a petition filed under section 301,302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of-

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;

(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title.

 Second, you as the attorney have an ethical obligation to tell the client that you are working for free and that any payment made by the clinet in a Chapter 7 case is voluntary!

Third, you are the attorney in the case, even if you are not paid. It would be difficult for you to substitute out of the case with Judge permission if you tell the Judge you are not being paid, when the debtor has no obligation to pay you! and

Fourth, your clients are professional debtors and have been avoiding creditors for a long time. It is highly unlikely they will pay you under such promises after the case is filed.

Practice Pointer:

Take your fee upfront and you will sleep better at night even though Joe down the street is not doing the right thing.





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