Debtor’s Attorney’s Fee May Be Paid Ahead of DSO Claim

Debtor’s Attorney’s Fee May Be Paid Ahead of DSO Claim

| Oct 31, 2016 | Bankruptcy |

When attorneys file Chapter 13 cases, they some times put part of their fee in the Chapter 13 Plan. This will cause some delay in paying the fee because the Chapter 13 Trustee will not start paying creditors, including the debtor’s attorney, until the plan is approved, which typically takes about 6 months. In Chapter 13 cases, Congress confirmed that attorney’s fees for counsel are required to be paid ahead of, or at least concurrently with, other creditor claims. In the recent case of In Re Stephen D. Chamberlain, 2016 WL 4169198 (Bankr. D. Colo. 8/14/16), the Court stated that “Section 1322(a)(2) does not require that claims entitled to priority be paid in the order of their priority. Instead, all Section 507 claims (whether for DSO claims, attorney’s fees, taxes, or otherwise) must be paid in full in cash over time under the plan. If a debtor cannot pay all Section 507 priority claims in full during the term of the plan, the plan cannot be confirmed. Congress confirmed that attorney’s fees for counsel are required to be paid ahead of, or at least concurrently with, other creditor claims.

In a recent case in the Bankruptcy Court in Greenbelt, Maryland, our law office filed a Chapter 13 plan and listed our fees to be paid “concurrent” with the DSO priority claim. Counsel for the DSO creditor objected profusely to this Plan but had no case law to support his position. The judge hearing the Objection to the Plan has taken account of this case out of Colorado. As in the Colorado case, the creditor attorney also objected that the debtor’s plan was not proposed in good faith. While the court in our case has not ruled on the issue, we are hopeful that her ruling will be in line with the Chamberlain case.

If you are experiencing financial difficulties and are considering bankruptcy pleaase contact us. The firm of Laura Margulies & Associates, LLC has successfully handled thousands of bankruptcy cases in Maryland and Washington, D.C., many involving unique or novel issues. Please call us today for a consultation at (301) 816-1600. Our website address is: www.law-margulies.com.