482 B.R. 576
Bankr. E.D. Mich.2012Background
- Debtors filed a Chapter 7 case on April 2, 2012 and hired BOC Law Group pre-petition.
- Pre-Petition Agreement (March 1, 2012) set a $1,000 fee for pre-petition services and stated BOC would not represent post-petition absent a new agreement.
- Post-Petition Agreement (April 4, 2012) set a $2,000 fee for post-petition services to be paid in monthly installments.
- Debtors paid $1,000 pre-petition and later entered the Post-Petition Agreement; Rule 2016(b) disclosed $3,000 total compensation.
- UST moved under § 329(a) seeking cancellation of the post-petition fee and disgorgement of any post-petition amounts; Court held a hearing and reserved ruling pending an affidavit addressing consultation and informed consent under MRPC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether pre- and post-petition agreements constitute a single pre-petition debt | UST argues the two agreements effectively form a pre-petition debt (Rittenhouse). | BOC contends the agreements are separate with post-petition services non-dischargeable. | Not a single pre-petition debt; post-petition obligation is non-dischargeable. |
| Whether unbundling of pre- and post-petition services complies with MRPC and §329 | UST/egwim-style critique that unbundling is impermissible. | BOC argues unbundling can be permissible if properly consulted and consented to. | Unbundling is not per se prohibited; requires competent representation, adequate consultation, and fully informed consent. |
| Whether BOC's unbundling complied with MRPC in this case | Record insufficient to show adequate consultation and informed consent. | BOC asserts it provided pre-petition guidance and that consent was voluntary. | Court cannot determine compliance on record; requires BOC affidavit addressing adequacy of consultation and informed consent. |
Key Cases Cited
- Rittenhouse v. Eisen, 404 F.3d 395 (6th Cir. 2005) (dischargeability scope of pre-petition attorney fees; § 329 coverage noted in passing)
- Bethea v. Robert J. Adams & Associates, 352 F.3d 1125 (7th Cir. 2003) (distinguished pre- vs post-petition fee agreements; post-petition not dischargeable)
- In re Gourlay, 483 B.R. 496 (Bankr.E.D. Mich. 2012) (pre-petition fees dischargeable; post-petition fees not; § 329 relief discussed in context of two agreements)
- In re Mansfield, 394 B.R. 783 (Bankr.E.D. Pa. 2008) (unbundling fees; discusses whether separate pre/post-petition agreements permissible depending on fee terms)
- In re Castorena, 270 B.R. 504 (Bankr.D. Idaho 2001) (limits on scope of representation in Chapter 7; informs MRPC interpretation used in Egwim)