Do your Due Diligence to Preserve What’s Due!

Protecting the fees we earn is paramount to becoming and remaining a successful attorney. What happens when all of a sudden we find that the fees that we just EARNED on a case can be disgorged at any time by a Bankruptcy Trustee??? Pandemonium, at first, fortunately there are simple and effective ways to combat this horrible, horrible outcome.

Title 11 of the U.S. Code is probably only read by bankruptcy practitioners and those curious few with more spare time on their hands than they know what to do with. However, I would strongly encourage every attorney out there to read through it, pick up an cliff-notes version, or at the very least take a friendly bankruptcy practitioner out for lunch and ask some questions!

I say this, because 11 U.S.C. § 327 deals with the appointment of professionals, as does Fed. R. Bankruptcy 2014 and, in the Southern District of Ohio, L.B.R. 2014-1. To date, the application to appoint professionals has been primarily viewed as pertaining mainly to personal injury, worker’s compensation, social security and probate attorneys. However, they are just as applicable to family law and other practitioners, and there is a strong push to have their applicability enforced to these individuals.

What much of these rules boil down to, is that unless appointed by the Court as a professional, attorneys (professionals) cannot accept payment from debtors when that payment is part of an active bankruptcy estate. Any such payments received may be disgorged by the bankruptcy trustee if attorneys don’t do their due diligence.

So how do DR and other retained professionals avoid this wholly undesirable outcome??? Well the process is actually pretty straight forward! Just SCAN! Search, Confirm, Apply, Notify.

• SEARCH- Perform a nationwide bankruptcy search on your client for bankruptcy filings. It’s easy to search using the Public Access to Court Electronic Records (PACER) system. If you don’t have a PACER account yet sign up for it! It’s free to sign up! The charge, at date of this article, is $0.08 per viewed page, which is only actually billed if you exceed an aggregate $10.00 / quarter. It’s so easy that I started my PACER account when I was in undergrad doing capstone papers on the Three-Strikes Laws in the US and on the Timothy McVeigh case.

• CONFIRM– Sometimes clients don’t recall that they were in a bankruptcy or even that think bankruptcy is only a Chapter 7 creation. “I wasn’t in a bankruptcy, I was in a 13!” After conducting your PACER search, confirm your results with your client, just in case an identity was stolen or false filing made! Also confirm that you’ll be talking to the bankruptcy attorney at next because if the client is in a joint Chapter 13 with his/her spouse, you’ll find that the bankruptcy attorney represents both and has a duty to each client!

• APPLY– If the client is in a bankruptcy, complete the LBR 2014-1 form you can find on the on the Dayton 13 Trustee’s Website (titled PI/WC/SS/MISC Applications & Orders). This is the point you want to have called the bankruptcy attorney and discussed the matter and what your client is trying to do. Remember, if the client is in a joint Chapter 13 with his/her spouse a new bankruptcy attorney is mostly likely needed for each!

• NOTIFY– Make sure your client knows what is happening here and at each step of the way. The client may be wondering why he/she came to you to file a divorce quickly, but you’re now taking time to talk to other attorneys. Keeping your client up to date is crucial for happy clients who then don’t want to convert their 13 into a 7 and toss your bill in there!

These are just the basic steps needed to avoid the disgorgement of earned fees. Quite a bargain when you think that to check this all may cost you 8-cents and 10 minutes of time.

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