Retainer Agreements, Fee Disclosures, and the EDKY Rights and Responsibilities of Debtors’ Attorneys

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Are you adequately and accurately disclosing to your clients and to the court what your fee agreement is for representing debtors in chapter 13 cases in the EDKY?  Many attorneys, I fear, are not.

Debtors’ attorneys as debt relief agencies under BAPCPA must have written agreements with their clients explaining what services will be provided and the fees for those services.

Attorneys are required to file with the court a disclosure of compensation paid or agreed to be paid for services rendered  or to be rendered in connection with the case.

In the EDKY, if an attorney chooses to accept the presumptively reasonable fee (a/k/a the “no-look fee”), the attorney and the debtor must agree to the Rights and Responsibilities of Chapter 13 Debtors and Their Attorneys, and the attorney must certify that such agreement has been made and that a copy of the Rights and Responsibilities has been given to the debtor.

So in the EDKY, there are two written agreements between the debtor and the debtor’s attorney (the retainer agreement and the Rights and Responsibilities), and there are two disclosures the attorney makes to the court regarding services to be provided and the agreed-upon compensation (the fee disclosure and the certification regarding Rights and Responsibilities).

In your office, are your retainer agreement, your fee disclosure, and the Rights and Responsibilities consistent with each other?  If you have not updated your retainer agreement since January 1, 2012 (when the court adopted the no-look fee and Rights and Responsibilities), the answer is probably no.

What about your fee disclosures – are you accurately disclosing to the court what your retainer agreement covers?  Look at this commonly used fee disclosure:

fee-disclosure-01

This cookie-cutter language has been around for years (maybe it’s the default example in your software program?), and it is used by the majority of practitioners in the EDKY.  Is it accurate in your practice?  If you are using the same retainer agreement for chapter 13 cases that you use for chapter 7 cases, I can kind-of understand why you are telling the court in a chapter 13 case that your fee covers reaffirmation agreements.  Otherwise, the use of this particular disclosure doesn’t make sense to me.

Also, notice the exclusion above for “judicial lien avoidances.”  However, in the EDKY, the no-look fee covers “motions to avoid liens on real or personal property,” so the fee disclosure contradicts what the attorney has agreed to do in the Rights and Responsibilities.

I came across the following fee disclosure, which at least makes an effort to be consistent with the attorney’s retainer agreement, but it isn’t much a disclosure to the court since the retainer agreement is not attached.

fee-disclosure-03

In the following disclosure, the attorney states services performed after confirmation will be billed separately, yet it is inconsistent with the Rights and Responsibilities, which requires the attorney to provide certain post-confirmation services in exchange for the no-look fee (which this attorney is requesting).

fee-disclosure-04

Many of you need to go back to the proverbial drawing board.  Reread the Rights and Responsibilities and compare it to your retainer agreement.  Then work on the disclosure you make to the court.

Bankruptcy Form 2030 (the Disclosure of Compensation of Attorney for Debtor) is a “Director’s Form” that can be modified.  The default language is as follows:

fee-disclosure-b2030

The instructions for Form 2030 provide in part: fee-disclosure-instructions

In looking at various fee disclosures, I found a few that have been tailored to be consistent with the Rights and Responsibilities.  Some of these  could use some tweaking (one uses an old form with the paragraphs numbered 6 & 7 instead of 5 & 6; another still incorporates the language about reaffirmation agreements and judicial lien avoidances that I complained of above).  But I commend the attorneys for being attentive to the importance of the Rights and Responsibilities and the need for accurate fee disclosures.  Here are some examples:

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I think it is important for attorneys to make sure their retainer agreements with chapter 13 debtors adequately inform the clients of the services the attorney will provide for the agreed-upon fee; that the retainer agreement is consistent with the Rights and Responsibilities (if the no-look fee is being requested); and that the attorneys’ fee disclosures to the court are accurate.  I hope to see at least a few attorneys change their fee disclosures (and if necessary, their retainer agreements) after reading this.

 

 

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