Consumer Bankruptcy Journal Spring 2015 - Page 35

Chapter 7 Attorney Fees bankruptcy attorneys to receive their fees. The debtor’s attorney and the debtor in In re Slabbinck agreed to a limited scope of representation fee agreement whereby two separate fee agreements were entered into, one pre-petition and one post-petition, and both agreements state specifically the fee to be paid and the services to be rendered.6 The court held that if the attorney’s legal services are unbundled between pre-petition and post-petition services in strict conformance with the MRPC, such opportunity for the debtor to retain an attorney and file their bankruptcy at a reduced upfront fee, thereby receiving protection from their creditors within Chapter 7 and permitting the attorney to receive payment on attorneys’ fees post-petition. However, additional issues arise once the bankruptcy is filed and there is outstanding attorneys’ fees because the relationship between counsel and debtor changes. The debtor’s attorney duties and obligations now seem to be in conflict: 1. protect the debtor and get as much debt “... there seems to be a remedy that might reach a solution to the problem of ensuring that debtors are able to receive the protection of bankruptcy and permitting the bankruptcy attorneys to receive their fees.” unbundling of legal services does not by itself warrant any relief under 11 U.S.C. § 329. MRPC requires (1) the attorney competently represents the individual debtor despite any limitation on the scope; (2) attorney provides adequate consultation to the individual debtor concerning the limitation on the scope of attorney’s representation and legal matter in question; and (3) the individual debtor makes fully informed and voluntary decision consent to such limitation. Therefore, the post-petition fee agreement survives the bankruptcy thereby obligating the debtor to pay for post-petition attorney fees. The holding Slabbink does create an discharged as the Code permits and 2. ensuring that their fees paid. The debtor who desperately is seeking a fresh start now has a new obligation to their bankruptcy attorney that will survive the bankruptcy discharge. Further, it appears that the bankruptcy attorney is permitted to proceed with collection matters if the debtor does not pay their attorney fees, thereby putting the debtor back in their original conundrum that brought them to seek the counsel of the bankruptcy attorney. Obligating the debtor with new non dischargeable debt from their attorney does not seem be what Supreme Court had in mind when it held over 80 years ago that the “. . . purpose of the act has National Association of Consumer Bankruptcy Attorneys Spring 2015 been again and again emphasized by the courts as being of public as well as private interest, in that it gives to the honest but unfortunate debtor . . . a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”7 A possible solution might be a specific and uniform pre-petition fee agreement that is monitored by the bankruptcy court that counsels and informs the debtor that unpaid attorneys’ fees will be discharged in the Chapter 7; however, they have the option to continue payments to the attorney. This will allow the debtor that does not have the funds to pay the bankruptcy attorney pre-petition protection under the Bankruptcy Code and the expertise of a skillful and knowledgeable bankruptcy attorney thereby increasing the debtor’s chance of a successful discharge. You Have Bills to Pay? Ethics in Getting Paid in Chapter 7, 11 and 13 Cases. Hon. Phillip J. Shefferly. ABI- Central States Bankruptcy 2013. Workshop. Page 426. 2 Lamie v. Unitied States Trustee, 540 U.S.526, 538 (2004). 3 Rittenhouse v. Eisen, 404 F. 3d 395,396 (6th Cir. 2005). 4 In re Michel, 2014 WL 1647009 (Bankr.E.D. Mi. 2004). 5 In re Gourlay, 483 B.R. 496 (Bankr.E.D. Mich. 2012, aff’d, 496 B.R. 857 (E.D.Mich.2013). 6 In re Slabbink, 482 B.R. 576 (Bankr. E.D. Mich. 2012). 7 Local Loan Co. v Hunt, 292 US 234 (1934). 1 CONSUMER BANKRUPTCY JOURNAL 35