Bankruptcy judges can control the fees that bankruptcy attorneys are paid, and they can also sanction them for improper conduct, such as by not disclosing what fees that they have received from a debtor, as they are required to do by the Bankruptcy Code.

In a recent court case, the 5th Circuit Court of Appeals ruled in favor of local bankruptcy attorney Reese W. Baker and Baker & Associates, finding that a sanction of $98,775, in addition to losing all attorney fees that he had been paid for representing a debtor named Whitley in 2 bankruptcy cases, was too much because the $98,000 sanction was not attorney fees. Cage v. Baker, 5th Cir. 2013.

The $98,000 was money that Baker had paid himself to buy a client's properties at the foreclosure sales of the properties, after the client had been sentenced to prison for an unrelated crime. And the bankruptcy court had cited Baker for violation of the disclosure requirements of Sec. 329 of the Bankruptcy Code, not on its inherent power to sanction attorneys for misconduct.

But the 5th Circuit Court remanded the case back to the bankruptcy court to "develop the basis for and extent of any further sanction..." So it is possible that Baker will be sanctioned further for his conduct, possibly even the entire $98,775, but it will not be because of his violations of Section 329, but as a disciplinary sanction.

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization