Attorneys’ Fees in Bankruptcy Cases

A case that concerns bankruptcy lawyers’ fees is currently before the U.S. Supreme Court. In short, the Supreme Court will be deciding this question: does the Bankruptcy Code allow judges to award attorneys’ fees to advocates who successfully defend bankruptcy fee applications?
The case could have significant consequences for debtors as well as the likelihood of bankruptcy attorneys taking future cases, according to a recent article from Reuters. Do you have questions about filing for consumer bankruptcy? It’s always important to discuss your case with an experienced Chicago bankruptcy lawyer. Contact the Emerson Law Firm to learn more about how we can assist you.
Bankruptcy Fee Applications
In order to understand what the current bankruptcy fee issue is all about, you’ll need to have a basic understanding about how the law handles bankruptcy cases and attorneys’ fees. The Bankruptcy Code has specific compensation provisions for attorneys who handle bankruptcy cases. In short, professionals who perform services in a bankruptcy case must offer information about the services they’ve provided, the amount of time they’ve spent on those services, and the total fees that they’re requesting.
A number of recent law review articles have focused on fee applications, emphasizing that attorneys who submit fee applications must prove that they’re entitled to the fee. When an opposing party objects to attorneys’ fees, the applying firm must defend its fee application. As you might imagine, depending on the case, this can take a lot of time and money. As such, it makes sense that attorneys who can be compensated for the time and energy involved in defending a fee application are more likely to take bankruptcy cases in the future.
Department of Justice Says Attorneys’ Fees Should Apply
An earlier case from the 5th Circuit—the case that’s currently on appeal and pending before the Supreme Court—indicated that debtors’ attorneys couldn’t obtain fees for the costs of defending fee applications. What does this decision mean and why is it currently being heard by the U.S. Supreme Court?
In short, bankruptcy judges, bankruptcy bar associations, and bankruptcy professors argue that “the 5th Circuit’s ruling dilutes overall fees for bankruptcy lawyers and discourages lawyers from taking bankruptcy cases.” According to that group, that’s “exactly what Congress was trying to avoid when it gave bankruptcy judges the discretion to award fees that put bankruptcy lawyers on par with colleagues in other practices.”
The U.S. Department of Justice (DOJ) agrees, it seems. To be sure, the DOJ submitted an amicus brief that “offered a firmer, broader policy on fees.” As a quick historical recap of the DOJ’s position, it previously suggested that “fees for defending fees applications generally are not appropriate,” but that judges could make exceptions depending on the circumstances of the case. Now, Reuters emphasizes that the federal government appears to have shifted its position.
If the federal government believes that bankruptcy lawyers should be entitled to additional fees for defending fee applications, will the U.S. Supreme Court agree? While the case that’s currently before the Supreme Court doesn’t focus on consumer bankruptcy, the decision could have an effect on personal bankruptcy filings in the future.
In the meantime, if you are thinking about filing for consumer bankruptcy, don’t hesitate to contact an experienced Oak Park bankruptcy attorney. We can answer your questions today.
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