What happens when your bankruptcy attorney's application for employment is denied? 11 Answers as of December 02, 2011
We filed a Chapter 11 BK and gave our attorney a $7500 retainer fee. He had used $4500 of it before he even filed the BK and the trustee objected to his application for employment and the judge agreed and denied his application. He has filed an appeal but we do not think that is going through either so what happens if the appellate court agrees with the judge and also denies his application? Do we have to get a new attorney? Does he have to return our money so we can afford a new attorney? He does seem to be concerned and keeps working on stuff and acts like business as usual but we are not thrilled with his services thus far as our disclosure statement was also denied by the trustee and a creditor and we cannot seem to get any answers from him what any of these means when the court files objections for his employment and now the disclosure statement citing it was denied because "the debtors misunderstood our memorandum decision on the application for employment." I guess we did misunderstand because no one will explain anything to us on what is going on when we ask. Any insight about what may happen next if his employment is denied?Free Case Evaluation by a Local Lawyer!
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The Law Office of Marvin Wolf | Marvin Wolf
The bankruptcy court has to approve all money spent in a bankruptcy and the employment of professionals. The court would usually provide a reason at the hearing or in the denial order You are entitled to a transcript of the hearing and a copy of the denial order Your attorney would have to address the reasons for the denial in his appeal and you are entitled to a copy of that document as well. There can be many reasons for denial. Sometimes the court may want the attorney to forfeit all pre-filing moneys so that the attorney will be "disinterested." Also, Chapter 11 is not for amateurs (note - I'm not saying your attorney is one) - possibly the court was concerned about some basic and obvious defects in the filing papers. Sometimes the court is concerned about conflicts with other cases In any event, you are entitled to a full and open discussion with your attorney about what is going on and why. The court can also make a lawyer "disgorge" his fee. Disclaimer: This is only general information and not legal advice. Debt relief agent and attorney at law.
Answer Applies to: New Jersey
Replied: 12/2/2011
Bankruptcy Law office of Bill Rubendall | William M. Rubendall
An attorney whose employment as debtor's chapter 11 attorney is denied must refund the full fee upon request, unless the bankruptcy court makes a ruling approving payment of fees.
Answer Applies to: California
Replied: 12/1/2011
Mazyar Hedayat and Associates | Mazyar Malek Hedayat
The fact that you filed Chapter 11 and have an Attorney means that your questions cannot be answered in this forum. However, I can tell you in general terms that if your lawyer's Application to be Employed was denied then he or she is already under an obligation to disgorge your money. The appeal of that denial by the bankruptcy court may result in changed circumstances, but until a decision comes down the Attorney is not entitled to payment. In fact, no sums may be retained by an Attorney on account of Chapter 11 work without approval of the bankruptcy court. It sounds as if your Attorney may already be looking at some trouble. Feel free to contact us to discuss your questions in greater detail.
Answer Applies to: Illinois
Replied: 11/30/2011
Law Offices of Michael J. Berger | Michael J. Berger
When the bankruptcy judge denies your attorney's application for employment, it is usually time for you to get a new bankruptcy attorney. This is especially true if the judge finds that your proposed bankruptcy attorney is not qualified to represent you in a Chapter 11, or has a conflict that prevents him from representing you in a Chapter 11. You should ask your attorney for a refund of all fees and costs that he charged you for after he filed your bankruptcy petition. He is not entitled to these fees if the court has denied his employment application. If he refuses to give you your money back, you should contact the attorney for the Office of the United States Trustee that is handling your case and ask him or her to file a "Motion to Disgorge." This means that the OUST will ask the bankruptcy judge in your case to order your former attorney to give you all or part of your money back.
Answer Applies to: California
Replied: 11/30/2011
Weber Law Firm, P.C. | William Weber
It would be impossible to fully answer these questions in an e-mail question and answer format. Unfortunately, you need to consult with another lawyer and get a second opinion. That said, if the lawyer's application was denied and refuses to give back any portion of the fee, you can file a motion to disgorge the fees. You will need to hire another lawyer top handle the motion to disgorge. The Court will probably order the lawyer to pay back some or all of the retainer fee.
Answer Applies to: Texas
Replied: 11/30/2011
The Stockman Law Office | Mary Stockman Esq.
This is very serious. No bankruptcy judge would deny an application for employment filed by an attorney unless there was substantial cause, in my opinion. You should ask for all of your money to be returned, if he/she refuses, file a bar complaint, get another attorney who will file a motion for your present counsel to disgorge the fee taken from you. Give the attorney a chance first, not for an appeal, but to return your funds and then proceed to protection of your interests. Go to www.floridabar and call the Florida Bar office to ask them about the attorney's history. Again, no bankruptcy judge in Florida or any jurisdiction would deny an employment application without cause.
Answer Applies to: Florida
Replied: 11/30/2011
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
$7500.00 is an extremely low retainer for a CH11. The shows he probably dies not know what he doing and having the fee application denied shows he doesn't know how to figure things out. Bettr get another lawyer.
Answer Applies to: California
Replied: 11/30/2011
Ross Smith, Attorney at Law | Charles Ross Smith III
The court will not permit your attorney to withdraw from your case at this point, unless you give him permission. Don't do that. The court has an interest in making sure that cases are professionally handled and the court also regulates fees. Your attorney will continue to represent you professionally and well, unless he is tired of practicing in Bankruptcy Court. He has no choice. The court is well aware that it will be virtually impossible for you to get another attorney under these circumstances. You are probably stuck with this attorney and he is stuck with you. So you must both work to make the best of a tough situation. You have not said what Chapter of Bankruptcy you filed under. However, if the attorney loses the appeal he will have to "disgorge" the excess fees. The fees will go to the trustee for the benefit of creditors or possibly to you, depending on what chapter of bankruptcy you are in. The court will let you and the attorney who any disgorgement is to be paid to.
Answer Applies to: Ohio
Replied: 11/30/2011
The Schreiber Law Firm | Jeffrey D. Schreiber
Usually an application for employment are denied if 1) the attorney did not timely file the application, 2) if there is a conflict of interest or 3) the attorney does not have the background or ability to adequately represent a Chapter 11 Debtor. Why was his employment denied? I would look for another attorney as, if his employment is denied, he cannot represent you. You should be able to have him return the fees as he was not approved and has no right to claim fees as all fee requests must be approved by the Court. If he has an administrative claim, he can make that through the Chapter 11 process down the road.
Answer Applies to: California
Replied: 11/30/2011
Foster Law Group | William Foster
You are represented by counsel. It would be highly inappropriate and possibly unethical for another attorney to provide legal advice to you so long as you have legal representation in the same matter. If you are concerned you are not receiving adequate legal representation, you may consider terminating your attorney's representation and hiring new counsel.
Answer Applies to: Colorado
Replied: 11/30/2011
Law Office of Harry L Styron | Harry L Styron
A bankruptcy attorney in a Chapter 11 proceeding must file an application for fees with the court and get it approved before he can take any fees. What he should have done was put the $7,500 in his trust account and not touched it without a court order (see 11 USC 330, which can be found by Googling the citation). It does not sound like he knows what he is doing, even about basic things. You should probably get another attorney. If you have trouble in this regard you should contact the State Bar Association and the US Trustee for the court where your matter was filed. I do note that $7,500 is a very small retainer for a Chapter 11 proceeding.
Answer Applies to: California
Replied: 11/30/2011
