Trustee Blog

UST and Attorney Fees

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Attorney Fee after filing.

 

Chapter 7 Bankruptcy Trustee Steven Speier had a case the other day which the Assistant United States Trustee appeared for a case with an attorney. Usually the Assistant UST appears on cases for pro se debtors. The Assistant UST asks questions about the bankruptcy petition preparers and the amount of fee charged to these debtors.

The other day though, the Assistant UST asked the debtor how much his attorney charged him. The attorney was sitting right there next to the client. The client said the attorney fee charged was over a $1000, but the amount actually paid before the case was filed was less than half. The debtor went on to say that he was paying the attorney today a sum and would pay the rest next month.

The Assistant UST then asked for a copy of the retainer agreement. Both the attorney and the debtor said they would send a copy to the US Trustee. The Assistant UST then said he would talk to the attorney off the record. The matter was concluded and the Assistant UST and the attorney went outside to talk.

I did not hear the conversation, but the issue is that any attorney fee due and owing the attorney on the date of filing a Chapter 7 case, is a dischargeable debt. In other words, the debt the debtor owes to the attorney on day of filing, is a debt that is going to be discharged. The attorney fee does not have a special protection in the law in Chapter 7 bankruptcy cases.

My guess is that the Assistant US Trustee wanted the attorney and the debtor to know that the debt is not legally collectable. Of course, the client may voluntarily repay the attorney fee, or any other dischargeable debt, but the client is under no legal obligation to pay that debt.

Practice Pointer:

In Chapter 7 cases, do not take your attorney fee after the filing of the bankruptcy case.

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