Bankruptcy Law Blog

Monday, January 23, 2017

Are Attorney Fees Dischargeable in Bankruptcies?

Everyone files for bankruptcy with different overwhelming financial obligations looming over their heads. Sometimes, those obligations include legal fees. Ideally, particularly with a Chapter 7 bankruptcy, all debts will be wiped out, or at least reduced in a Chapter 13 bankruptcy. Unfortunately, some obligations will remain including certain legal fees. Generally speaking, unsecured legal fees are fully dischargeable in a Chapter 7 bankruptcy, just like any other unsecured debt.

Non-Dischargeable Legal Fees

Attorneys’ Fees as Secured Debt.  In some cases, attorneys will place a provision in their legal services agreement that allows them to place a lien on the client’s real estate, thereby securing the debt. If this has happened to you, you will want to talk to your bankruptcy attorney about a lien strip, cramdown or avoidance before filing. If the lien remains intact, then it will encumber the real property it is attached to and will remain until paid or the property is sold and the proceeds used to pay the lien.

Legal Fees for Certain Defenses.  If you have been sued for breach of fiduciary duty, an intentional tort such as fraud or a criminal action, those attorney fees are generally non-dischargeable, with a few exceptions.

Attorneys Fees for Spousal or Child Support.  Spousal support and child support are two obligations that are non-dischargeable in bankruptcy. Attorney fees used to obtain such support may be non-dischargeable as well in Chapter 7 bankruptcies, but may be in Chapter 13 cases, depending on the circumstances.

Attorneys Fees for Bankruptcy Filing. While many bankruptcy attorneys require payment in full prior to the filing of the bankruptcy papers, there are some that allow for payment plans that have payments continuing after the bankruptcy is filed or completed. These types of payment plans are under scrutiny by the Bankruptcy Court because bankruptcy is supposed to discharge all obligations incurred prior to filing, which would include the legal services agreement.

Thinking About Bankruptcy?

If you have heavy financial obligations that you are unable to meet, bankruptcy may be an option for you. Even if you think your debts are non-dischargeable, talking to an experienced bankruptcy attorney may provide a number of options for you. The Alabama bankruptcy lawyers at Padgett and Robertson can provide you with an expert’s opinion on your debt situation and relief options. Call today at 251.342.0264 for a consultation.

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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”

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