560 B.R. 312
Bankr. N.D. Ill.2016Background
- Debtor Rade Petrovic filed a Chapter 13 petition on June 8, 2016 the day he faced a state-court contempt hearing for failing to satisfy a 2008 divorce judgment requiring large payments and support obligations.
- Schedules listed over $700,000 in unsecured debt, exceeding the Chapter 13 unsecured-debt limit; many debts were marked contingent/unliquidated without adequate explanation.
- Trustee Glenn Stearns moved to dismiss for Chapter 13 ineligibility; the court agreed on August 19, 2016 and gave Petrovic a chance to convert to Chapter 11; Petrovic did not convert and the case was dismissed September 9, 2016.
- Petrovic paid counsel J. Kevin Benjamin a $4,000 prepetition retainer; Benjamin represented Petrovic in opposing dismissal and in scheduling, but the case was short-lived and Petrovic made no plan payments or meaningful prosecution.
- After dismissal the trustee moved under Fed. R. Bankr. P. 2017 / 11 U.S.C. § 329 to examine and disgorge Benjamin’s fees as excessive; Benjamin primarily objected that the court lost jurisdiction by dismissal.
- The court found ancillary jurisdiction to decide post‑dismissal § 329 fee challenges but denied the trustee’s motion on the merits, concluding the fee did not exceed the reasonable value of services performed.
Issues
| Issue | Plaintiff's Argument (Stearns) | Defendant's Argument (Benjamin) | Held |
|---|---|---|---|
| Jurisdiction to adjudicate a § 329 fee challenge after case dismissal | Court lost jurisdiction when case dismissed; motion improper | Bankruptcy court retains ancillary "clean‑up" jurisdiction to address remaining matters | Court has ancillary jurisdiction to decide § 329 fee examination post‑dismissal and may proceed |
| Whether Benjamin's $4,000 fee exceeded reasonable value under 11 U.S.C. § 329 | Fee should be disgorged because Petrovic was ineligible for Chapter 13 and the filing was a bad‑faith stall; Benjamin provided no real value | Benjamin performed services the debtor sought (a stay/delay); fee correlates to services rendered and was not excessive | Fee was not excessive; debtor obtained the stay/delay he sought, so § 329 disgorgement is unwarranted; Rule 9011 (sanctions) would be the proper vehicle if misconduct existed |
Key Cases Cited
- Knight v. US (In re Knight), 55 F.3d 231 (7th Cir. 1995) (disputed debts count toward § 109(e) limit)
- Sweports, Ltd. v. United States (In re Sweports, Ltd.), 777 F.3d 364 (7th Cir. 2015) (bankruptcy courts have ancillary "clean‑up" jurisdiction after dismissal)
- Geraci v. Homestake, Inc. (In re Geraci), 138 F.3d 314 (7th Cir. 1998) (§ 329 inquiry limited to whether attorney fee exceeds reasonable value of services)
- Investment Bankers, Inc. v. Turner (In re Investment Bankers, Inc.), 4 F.3d 1556 (10th Cir. 1993) (Congress enacted § 329 to police potential overreaching in debtor–attorney payments)