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Judges Can Exercise Discretion Over Attorneys' Fees in Bankruptcy Cases

Atty feess.jpgA recent study found that while bankruptcy attorney fees vary from state to state, between 2005 and 2009 fees averaged $1,080 to $1,200. In Idaho, fees were as little as $700. In other parts of the country, they can climb to $2,500.

Those fees are in addition to the fees the bankruptcy court will collect when you file. Filing fees can range from $306 for a Chapter 7 filing to $1213 for a Chapter 15 bankruptcy.

Is Your Bankruptcy Attorney Charging You Too Much?

If you feel that your attorney is overcharging you to handle your bankruptcy, you may find some relief from the judge. Bankruptcy judges may regulate attorney compensation and have the authority to discipline attorneys for charging excessive fees.

Take the example of James Glen Whitley. In 2008 and 2009, he failed to reorganize his debts under his Chapter 13 filing. On March 4, 2009, the court dismissed Whitley's 2008 petition without prejudice (without prejudice means that none of Whitley's rights or were considered to be lost or waived). However, in 2009 the court dismissed his case again, this time with prejudice (when a judge dismisses the case with prejudice, the party who filed the claim is forbidden from re-filing the case). But then a few months later, the court vacated its dismissal of Whitley's case and converted his filing to a Chapter 7 case.

This Was a Complicated Legal Case

Whitley had other issues happening in his life. On August 27, 2009, Whitley was convicted of sexual assault of a minor and was sentenced to life in prison. He then transferred two properties to his attorneys who represented him in both cases to compensate them for fees owed to them. But the two properties had liens on them and when the third party holding the liens defaulted on the properties, Whitley's attorney Reese Baker, decided to attend the foreclosure sales in September 2009. He successfully purchased the properties at a substantially reduced price.

The story isn't over. In June 2010, the bankruptcy trustee filed an adversary proceeding against Baker, claiming that the transfers lacked court authority and were executed in breach of Baker's fiduciary relationship with Whitley.

In the end, the bankruptcy court determined that Baker had provided no services of value to his client and that Baker violated his ethical duty to disclose the transfer of properties. Baker was then ordered to return $12,074 he had collected as fees from Whitley and to return all consideration he had received from his client.

5 Facts You Need to Know Before You File for Bankruptcy

Before contacting a bankruptcy attorney, consider these factors:

  1. The law gives judges the right to examine the fees charged by attorneys and order them refunded to the trustee if they are unreasonable.
  2. Even if the attorney's fees seem reasonable, you can present additional information to the judge to prove otherwise.
  3. Attorney's fees can rise in accordance with the difficulty and intricacies of your bankruptcy case.
  4. Factors such as the number of creditors and the amount of debt should not, by themselves, change the fee you are charged.
  5. Filing jointly with a spouse should not increase your fees

Bankruptcy Services We Provide

We offer advice on various bankruptcy matters and processes, including:

Chapter 7 bankruptcy: Also known as liquidation bankruptcy, Chapter 7 allows for the discharge of unsecured debts including credit cards, medical bills and personal loans. In the average case, a person is usually able to exempt all their personal property to avoid a sale. The Chapter 7 process can be completed in as little as 90 days, allowing you to begin rebuilding your financial standing.

Chapter 13 bankruptcy: The Chapter 13 process allows you to create an affordable payment plan that gives you the chance to catch up on past due debts. The payment plan, lasting three to five years, gives you the opportunity to pay off lowered settlement amounts to your debtors and discharge your remaining debt once the plan is complete.

Bankruptcy litigation: Our staff offers bankruptcy litigation guidance to creditors and lenders interested in protecting their accounts from discharge during a debtor's bankruptcy proceeding. We also defend creditor litigation against the debtor.

Please contact our office at 707-623-1875 to schedule a free consultation with Jim Sansone to discuss your financial worries with our lawyer and to learn if the bankruptcy process is right for you.

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