In re Carr
United States Bankruptcy Court for the Eastern District of Kentucky
613 B.R. 427 (2020)
- Written by Liz Nakamura, JD
Facts
Chanda Carr (debtor) hired J. Christian Dennery (creditor), a bankruptcy attorney, to represent her in a Chapter 7 bankruptcy proceeding. Carr entered into a bifurcated fee arrangement with Dennery under which Carr paid Dennery (1) a $300 flat fee to prepare and file the initial Chapter 7 petition and (2) a $1,135 flat fee, payable in monthly installments, to cover both the bankruptcy filing fee and all postpetition services. Under the postpetition contract, Dennery advanced the bankruptcy filing fee, and Carr’s monthly payments were first used to reimburse Dennery for that advance. Before executing both the prepetition and the postpetition contract, Dennery had met with Carr to review the contracts in detail and fully explain his services, fees, and payment terms. After Carr received a Chapter 7 discharge, the bankruptcy court reviewed the prepetition and postpetition payment contracts for approval. At a hearing, the bankruptcy trustee challenged Dennery’s fee practices, pointing to the fact that Dennery charged a substantially lower fee for his prepetition work than for his postpetition work. Essentially, the trustee argued that Dennery improperly weighted the postpetition side of the payment arrangement to avoid his fees being discharged in the bankruptcy proceedings. It was undisputed that Dennery’s fees were reasonable, that Carr gave informed consent to both payment contracts, and that Dennery did not induce Carr to incur debt in order to pay for his services.
Rule of Law
Issue
Holding and Reasoning (Wise, J.)
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