Bankruptcy Court Rules Chapter 7 Attorney Fees are Discharged if not paid before bankruptcy filing

J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
Posted on Feb 19, 2013

In a 2012 case out of the Eastern District of Michigan, a bankruptcy court ruled that the balance due to an attorney for his Chapter 7 bankruptcy attorney fees, were discharged since they were not paid before the filing of the bankruptcy. In re Gourlay (Bankr. E.D. Mich., 2012).

To me, this has always been the law, but some lawyers continue to believe that their fees are not subject to discharge for some reason. The Bankruptcy Code is just that, a statutory code, and the only exceptions to the discharge of debts are contained in Sec. 523 of the Code. "Attorney fees owed" is not one of them.

Now in Chapter 13, fees can be paid after filing because they are an administrative expense, a priority debt, and the court orders that they be paid as part of the chapter 13 plan. But not so in Chapter 7. If an attorney doesn't collect his fees before the filing of the Chapter 7 case, he or she cannot collect them (unless the debtor voluntarily pays them).

The automatic stay prevents an attorney from trying to collect fees after a Chapter 7 is filed, such as by calling or sending bills to the debtor. And if the attorney tries to collect the fees after the Chapter 7 discharge, in my view it is a discharge violation, and could subject the attorney to being punished for contempt of court.

You are welcome to pay your Chapter 7 attorney fees to us out over time if you need to, and we will work with you on that. But we must have the fees "paid in full" prior to the filing of your case. That's the law!

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