Personal Bankruptcy: Discharging Attorney's Fees
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What Is Bankruptcy Discharge?
In a bankruptcy proceeding, the debtor and the court figure out a plan to repay creditors as much as possible. In exchange, the debtor is released from legal liability for the rest of the debt that he owes. The remaining debt is discharged and the debtor is not legally responsible for paying the debt.
Are Attorney’s Fees Dischargeable?
In personal bankruptcy, most debts are dischargeable—even unpaid attorney’s fees. Section 523 of the Bankruptcy Code lists fees that are not dischargeable. They include child support, alimony, debt that was incurred through fraud or false pretenses, luxury items bought right before the bankruptcy, government education loans, medical costs from driving drunk, reckless failure to pay debts, court fees, and other court costs.
Since the current bankruptcy attorney’s fees are included in court costs, she will get paid. In contrast, attorneys that the debtor hired prior to bankruptcy will probably not get paid. Often, attorneys with unpaid legal fees will lodge a complaint with the Bankruptcy Court, claiming that their fees were non-dischargeable. However, these claims usually fail because they run counter to the purpose of bankruptcy, which is to give the debtor a new economic start.
In response to this, attorneys are now anticipating their clients’ bankruptcies. Attorneys now routinely maximize their "retainer" (down payment) and encourage clients to file bankruptcy before legal services are rendered.
What If I Filed for Bankruptcy after a Divorce?
Family law practitioners, in particular, often run into problems when their clients file for bankruptcy immediately after divorce. Family lawyers have frequently argued that their fees are non-dischargeable, because they help the client to fulfill the duty to support the child, which is itself non-dischargeable. The BAPCPA, a bankruptcy law that went into effect in October 2005, made the law even stricter regarding the non-dischargeability of family support obligations.
However, courts rule that if attorney’s fees were not ordered to be paid in the original child support decision, then they are dischargeable in subsequent bankruptcy. Attorney’s fees are not alimony. Although attorney’s fees help collect spousal support, they do not go into a spouse’s pocket. Finally, there is no justification for favoring family lawyers above other lawyers who might be owed even greater sums of money.
Can I Discharge Fees or Fines Imposed By the Court?
The answer is typically no, you cannot discharge fees imposed by the court. Fines and other fees imposed by the legal system are designed to punish citizens who break the law. It would be unfair to punish some citizens and not other citizens simply because they can’t afford the penalty.
The only possible exception is if the fine or fee given is not retributive or punitive in nature. In personal injury lawsuits, for instance, the damage award taken from the defendant is not meant to punish the defendant, but to restore what was lost to the victim.
Do I Need a Bankruptcy Lawyer?
Filing for bankruptcy is a very complicated process. The law varies depending on where a bankruptcy is filed and also depends on which type of bankruptcy is filed. A bankruptcy lawyer knows the particulars of filing for bankruptcy, can recommend what chapter of bankruptcy is right for you, and can ensure that your paperwork is filed correctly so that all eligible debts are discharged.
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Last Modified: 01-15-2014 03:12 PM PST
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