Thomas McBride, et al v. Sharon Riley, et al (In re Sharon Boyd Riley)
Bankruptcy courts must cooperate before debtors’ counsel are assured of being reimbursed for advancing costs and expenses before filing.
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- Case Type:
- Case Status:
- Affirmed in part and Reversed in part
- 18-30535 (5th Circuit, May 13,2019) Published
- The bankruptcy court's interpretation of its own standing order regarding "no-look" compensation to Chapter 13 debtors' attorneys was reasonable. The standing order's deletion of a provision allowing the reimbursement of expenses advanced by the lawyer for the debtor’s benefit in a "no money down" chapter 13 bankruptcy case precluded allowance of such expenses under the standing order. Further, such advances were not allowable under 11 U.S.C. § 503(b) because payment of those expenses were pre-petition obligations of the debtor, not obligations of the estate.
- Procedural context:
- The appellants, chapter 13 debtor's attorneys, appealed the district court's order that affirmed the bankruptcy court's order interpreting its standing order regarding the allowance of "no-look" attorney's fee applications in chapter 13 bankruptcy cases. Two chapter 13 trustees represented the interests of the bankruptcy court on the appeal.
- The United States Bankruptcy Court for the Western District of Louisiana has a “no look” standing order for the allowance of attorney's fees in chapter 13 bankruptcy cases. Under the standing order, a debtor's attorney in a Chapter 13 bankruptcy case can have his or her attorney’s fees allowed, without a detailed accounting, so long as the amount sought by the attorney does not exceed the limit set in the standing order. In February 2017, the Bankruptcy Court amended its standing order for no look attorney’s fees in chapter 13 cases. For this appeal, the primary change was the omission of a provision that had allowed attorneys to include advances for certain pre-filing expenses. Two days after the new standing order became effective, appellant Thomas McBride entered into a “no money down” chapter 13 representation agreement with a debtor. Under this agreement, McBride agreed to advance to the debtor the costs for filing her petition, the cost for her credit counseling, and the cost for a credit report. The first two costs are generally required to file a Chapter 13 bankruptcy petition. McBride requested reimbursement under the no look fee system. The Chapter 13 trustee sought clarification from the bankruptcy court as to whether those expenses are reimbursable as administrative expenses under the no look fee system. Following a hearing in April 2017, the bankruptcy court entered an order in September 2017 holding that the expenses advanced by the debtor's attorney were not reimbursable under the no look provisions of the standing order. The bankruptcy court's interpretation of its own standing order regarding "no-look" compensation to Chapter 13 debtors' orders was reasonable. As a result, the omission of reference to the reimbursement of advanced filing fees and other expenses in the standing order precluded the debtor's attorney from an order allowing reimbursement of such expenses under the no-look provisions of the standing order. Further, such advances were not allowable under 11 U.S.C. § 503(b) because they were pre-petition obligations of the debtor, not obligations of the estate.The bankruptcy court further concluded that reimbursement of those fees was not mandatory under 11 U.S.C. § 503(b)(1) and that, even if McBride's application were construed as a formal fee application, the expenses could never be reimbursable under 11 U.S.C. § 330(a).
- REAVLEY, ELROD and WILLETT