483 B.R. 496
Bankr. E.D. Mich.2012Background
- Debtor filed Chapter 7 on March 13, 2012; attorney James P. Fregó filed the petition.
- Rule 2016(b) statement showed a flat fee of $1,000 with $100 paid pre-petition and $900 due post-petition.
- UST filed § 329 motion on May 24, 2012 seeking disgorgement of the $100 and cancellation of any further post-petition fees.
- Debtor received discharge on June 26, 2012; hearing held July 23, 2012.
- UST contends the pre-petition promise to pay $900 post-petition is dischargeable and that collecting it would violate automatic stay and discharge injunction; Fregó argues post-petition payment is permitted and not prohibited by discharge.
- Court narrows issues to whether the pre-petition agreement to pay post-petition is dischargeable, whether post-petition collection violates stay/injunction, and whether §329(b) requires cancellation and/or disgorgement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the pre-petition agreement to pay post-petition attorney fees dischargeable under §727? | UST argues it is dischargeable per controlling precedent. | Frego argues dischargeability conflicts with §329 and is contrary to practice. | Yes, dischargeable; pre-petition agreement to pay post-petition fees is discharged. |
| Do collecting any post-petition payment violate automatic stay or discharge injunction? | UST contends any collection activity violates §362(a) and §524(a). | Frego contends only actual collection actions violate; not the agreement itself. | Yes, any attempt to collect would violate stay and, after discharge, the injunction. |
| Whether §329(b) requires cancellation of the post-petition portion of the fee agreement? | UST seeks cancellation of the post-petition obligation as excessive. | Frego argues the entire fee arrangement may be permissible or creates issues of practice. | The post-petition obligation must be cancelled under §329(b). |
| Whether disgorgement of the $100 pre-petition payment is warranted? | UST seeks disgorgement of all pre-petition payment. | Frego argues disgorgement is improper given the services rendered and discharge status. | Disgorgement of the $100 pre-petition payment denied. |
Key Cases Cited
- Rittenhouse v. Eisen, 404 F.3d 395 (6th Cir. 2005) (pre-petition attorney fees dischargeable; §329 not an exception to discharge)
- Bethea v. Adams & Associates, 352 F.3d 1125 (7th Cir. 2003) (pre-petition attorney fees dischargeable)
- In re Fickling, 361 F.3d 172 (2d Cir. 2004) (pre-petition attorney fees dischargeable)
- In re Biggar, 110 F.3d 685 (9th Cir. 1997) (pre-petition attorney fees dischargeable)
- Lamie v. United States Trustee, 540 U.S. 526 (2004) (unused retainer/estate issues; practice constraints)