ATTORNEY ENTITLED TO COLLECT BALANCE OF FEES FOLLOWING DISCHARGE OF CHAPTER 13 CASE

Although attorney's fees are ordinarily treated as administrative expenses during the pendency of a chapter 13, such that any unpaid fees still owed when the final discharge comes through are discharged, the bankruptcy code permits a different treatment if the plan is confirmed.

In In re Johnson, __ B.R. __ (9th Cir. BAP 2006) the bankruptcy court originally held that the debtor's attorney's unpaid fees at the conclusion of the chapter 13 were discharged, because a chapter 13 discharge includes all debts provided for in the plan unless exempted from discharge; since attorneys' fees are typically provided for in the plan and are not excepted from discharge, any unpaid balance is discharged.

The Bankruptcy Appellate Panel reversed. Acknowledging that in the typical case the chapter 13 debtor's unpaid attorney's fees would be discharged, the court cited authority that a confirmed plan binds all parties, even if a provision of the plan is contrary to the Code. In this case, the debtor had signed off on a plan that was confirmed, and which contained a provision that any unpaid fees would not be discharged and that the attorney could collect directly from the debtor.

In ruling that the attorney's fees were not discharged in this case, the court distinguished In re Hanson, 223 B.R. 775 (Bkrtcy.D.OR 1998), where the plan did not explicitly except the attorney's fees from discharge. For full opinion - file:http://www.bankruptcymedia.com/bkfinder/news.html#Anchorthenews

LAMIE v. US TRUSTEE (01/26/04 - No. 02-693) (U.S. Supreme Court)  Bankruptcy Code section 330(a)(1) does not authorize compensation awards to debtors' attorneys from estate funds, unless they are employed as authorized by section 327. To be paid from estate funds under section 330(a)(1) in a chapter 7 case, the attorney must be employed by the trustee and approved by the court.

SCHROEDER v. ROUSE (06/21/01 - No. 00-6092)  Disgorgement of attorney's fees is an appropriate sanction where the attorney violated the Bankruptcy Code, the procedural rules, and the local rules by failing to submit a statement detailing the attorney’s compensation relating to the bankruptcy proceedings.   http://caselaw.lp.findlaw.com/data2/circs/8th/006092p.pdf