A is for Application
Many Consumer Debtors have a difficult time understanding how their attorney gets paid in a Chapter 13 case. So, today I want to discuss what is called an Application for Compensation. When you first meet with your attorney to retain them to represent you in your Chapter 13 Bankruptcy case, you are retaining that lawyer for a period of three to five years depending upon the length of your case. You are also retaining them to not only manage the underlying case, but to provide ongoing counsel to you, and provide additional services that may give rise to their filing an application for compensation with the court in your case.
Here in the Central District of California, attorneys will enter into a fee agreement with their clients and most will also enter into a Rights and Responsibilities Agreement or "RARA." However, the RARA is optional and some attorneys choose to charge only an hourly rate and will file an application for compensation with the court for managing the case from the start. The RARA will provide a flat fee arrangement with our clients for the work in preparing your case, filing with the court, representing you at your meeting of creditors, and your confirmation hearing. There is a lot of work involved in managing a Chapter 13 case, which is why additional fees can be incurred for managing the case and filing required motions, etc.
The fee agreement and the RARA will outline how your attorney gets paid in your bankruptcy case. Once your case is filed with the court, your counsel cannot collect their fees directly from you and must file an Application for Compensation with the court, which is a motion. If you receive a letter and invoice from your attorney, it should state that it was submitted in conjunction with a Supplemental Fee Application and filed with the court. You MUST read and review the information because you have only 20 days to OBJECT to the fees your attorney is asking for. If you object, you must notify your assigned Chapter 13 Trustee. If you do not object, the trustee still may object. The judge assigned to your case will always get the final say in whether your attorney is entitled to the amount they seek. It's important to understand how your attorney is compensated for all the hard work they put in on your behalf so that you're not caught off guard when you see their application for compensation.
Once approved, the Chapter 13 Trustee will pay your attorney from the money you pay into your Chapter 13 Plan. Your Plan payment will not be impacted by additional fees being sought by your attorney, if you are paying some money to your unsecured creditors. Remember to call your attorney with questions or concerns you may have about your case.
Photo by: Leo Reynolds
Learn more about the Bankruptcy Alphabet with Consumer Bankruptcy attorneys throughout the country. Other Lawyers Playing the Alphabet Game with the Letter A:
Abandonment, Abuse, Adversary Proceeding, Asset, Alimony, Arrest, Ask, Assumption, Attorney, Automatic Stay, and Avoidance.
