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