479 B.R. 681
Bankr. M.D.N.C.2012Background
- Thirteen Chapter 13 cases involve a no money down fee arrangement between debtors and Orcutt.
- Orcutt ads offered to advance filing and related costs, repaid via Chapter 13 plan.
- Contracts state flat fee includes filing fee, reports, counseling, PACER; total includes approximately $335 in other fees.
- Orcutt filed Amended Disclosure of Compensation listing advances as expenses advanced for the debtors.
- Hearing held July 26, 2012; plans were confirmed but objections preserved; cases consolidated for opinion.
- Court analyzes whether advances are prepetition loans and if they can be treated as administrative expenses or improper classifications.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are Orcutt’s advances prepetition loans? | Bankruptcy Administrator: advances create prepetition debt. | Orcutt: advances are not loans; benefit estate. | Advances are loans; prepetition claims against debtors. |
| Are advances recoverable as administrative expenses under §330(a)(4)(B) or §503(b)(2)? | Advances should be administrative expenses. | Expenses cannot be reimbursed as admin expenses under §330(a)(4)(B). | Advances are not recoverable as administrative expenses. |
| Is classifying prepetition unsecured advances as administrative priority under §1322(a)(3) permissible? | Discrimination against unsecured creditors avoided by proper classification. | Administrative priority claims allow priority treatment. | Classification as administrative priority violates §1322(a)(3). |
| Does Rule 1006 provide the exclusive remedy for unpaid filing fees? | Rule 1006 does not preclude other remedies. | Rule 1006 provides exclusive mechanism for installment filing fees. | Rule 1006 provides exclusive remedy; other avenues not available. |
Key Cases Cited
- In re Lawson, 437 B.R. 609 (Bankr.E.D.Tenn.2010) (prepetition fee obligations treated as claims in Chapter 13)
- Walton v. Clark & Washington, 454 B.R. 537 (Bankr.M.D.Fla.2011) (prepetition attorney fees can be treated as claims)
- In re New Power Co., 313 B.R. 496 (Bankr.N.D.Ga.2004) (definition of prepetition claims and timing of obligations)
- In re Nat’l Steel Corp., 316 B.R. 287 (Bankr.N.D.Ill.2004) (administrative expense requirements and estate benefit)
- In re Patch Graphics, 58 B.R. 743 (Bankr.W.D.Wis.1986) (priority of administrative expenses evaluated against estate benefit)
- In re DAK Indus., Inc., 66 F.3d 1094 (9th Cir.1995) (benefit to estate and postpetition transaction considerations)