Gina Marie Milner, 612 B.R. 415

Background

U.S. Trustee moved to review attorney B. David Sisson’s compensation and conduct as a "debt relief agency" under 11 U.S.C. §§ 329, 526–528 after a Chapter 7 consumer filing. Sisson used a "bifurcated" fee model and a financing vendor (Fresh Start).
Debtor: low‑income single mother facing imminent wage garnishment; Sisson filed a "bare‑bones" petition the day she sought help and provided pre‑ and post‑petition engagement contracts.
Fee structure: Debtor paid $300 pre‑petition (plus $335 filing fee) and agreed to a $2,400 post‑petition contract payable $200/month for 12 months; Fresh Start collected payments and retained $600 of the $2,400, advancing Sisson a portion under a line of credit.
Sisson’s court disclosures (Form 2030 initial and amended) were inconsistent or misleading about who received fees, timing of contract execution, and sharing of compensation with Fresh Start.
Court found the contracts confusing, likely executed pre‑petition despite being dated to suggest post‑petition execution, and that the bifurcated arrangement produced a substantial up‑charge (50%–80%) over local flat fees.
Remedy: Court held the pre‑ and post‑petition contracts void under §§ 526/528, declined to disgorge fees already paid, ordered one final $200 payment to Sisson (not to Fresh Start), and barred further Fresh Start contact about fees.

Issues

Issue	Plaintiff's Argument (UST)	Defendant's Argument (Sisson)	Held
Validity of bifurcated pre‑ and post‑petition fee contracts	Bifurcated contracts were used as a subterfuge and improperly executed to evade Lamie and discharge rules	Bifurcation is lawful if the post‑petition contract is truly executed post‑petition and is necessary to help indigent clients obtain counsel	Bifurcated contracts are not per se prohibited, but Sisson’s use here failed Hazlett‑style safeguards and was not properly used
Adequacy/truthfulness of §329 and Rule 2016 disclosures	Initial and amended disclosures were inaccurate/misleading about timing and sharing of fees with Fresh Start	Disclosures reflected the arrangements; any drafting changes came from Fresh Start templates and were inadvertent	Disclosures were confusing and misleading; they violated §329 and Rule 2016
Reasonableness/excessiveness of fees under §329(b)/§330	Fees imposed an unreasonable up‑charge (50%–80%) over customary local rates for essentially the same services	The pricing reflects financing, additional post‑petition work, and risk of nonpayment; lodestar analysis justifies fees	Fees were not reasonable or supported by credible proof; court found the up‑charge excessive
Compliance with §528 (contracts for consumer bankruptcy assistance) and consequences	Contracts did not clearly and conspicuously explain services, fees, termsof payment and were therefore void under §526(c)(1)	Contracts and consents disclosed terms; bifurcated model served debtor’s emergency needs	Contracts failed §528’s clarity requirements and were void; remedies limited to protections for debtor (no additional fee obligations to Fresh Start)

Key Cases Cited

Lamie v. United States Trustee, 540 U.S. 526 (precluded paying debtor's attorney from estate absent trustee employment)
Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229 (debt‑relief agencies include attorneys providing bankruptcy assistance)
Burrage v. United States, 571 U.S. 204 (statutory interpretation principle: courts apply text, not policy preferences)
Rittenhouse v. Eisen, 404 F.3d 395 (post‑petition promises to pay attorney fees can be dischargeable in Chapter 7)
Fickling v. [sic] (In re Fickling), 361 F.3d 172 (post‑petition promises treated as dischargeable claim analysis)
Bethea v. Robert J. Adams & Assoc., 352 F.3d 1125 (discussing enforceability of post‑petition fee agreements)
In re Biggar, 110 F.3d 685 (same circuit guidance on post‑petition fee obligations)
In re Griffin, 313 B.R. 757 (bifurcated contract must be real: offer, acceptance, consideration must occur post‑petition)