National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

Attorney Fees

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Fee-Only Plans Not Per Se Bad Faith

Making specific reference to NACBA’s “helpful” amicus brief, the First Circuit Court of Appeals found that fee-only chapter 13 plans are not per se bad faith under section 1325(a)(3). In re Puffer, No. 11-1831 (1st Cir. March 22, 2012). Debtor’s chapter 13 plan proposed to pay $2,900 to his counsel, $300 to general unsecured creditors and $400 as trustee fees. The bankruptcy court declined to confirm the plan on the basis that it was per se bad faith to file a plan in which debtor’s bankruptcy counsel was essentially the only beneficiary. In reversing, the first circuit borrowed the totality of the circumstances analysis from section 706(a), placing the burden on the debtor to establish that the facts are such that the chapter 13 plan is in good faith. The decision will make bankruptcy relief more available to debtors who otherwise could not find competent counsel and for whom proceeding pro se is a poor alternative. [Read more…] about Fee-Only Plans Not Per Se Bad Faith

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Berliner v. Pappalardo (In re Puffer), No. 11-1831 (1st Cir.)

NACBA has filed an amicus brief opposing the imposition of a bright line rule prohibiting attorney-fee-only chapter 13 cases as being filed in bad faith. Berliner v. Pappalardo (In re Puffer), No. 11-1831 (1st Cir.). The brief emphasizes that bad faith is necessarily a case-by-case, fact specific inquiry, and that there exist legitimate, good faith, reasons for seeking chapter 13 relief solely to make payments toward attorney fees and administrative costs. Because debtors eligible for chapter 7 relief frequently cannot afford to pay the attorney fees to file their cases, chapter 13 presents a viable alternative and nothing in the Code prohibits such filing. NACBA member David Baker filed the brief on NACBA’s behalf.
Brief 

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Fifth Circuit Affirms Denial of Attorney Fees to Wells Fargo

In a per curiam decision, the Fifth Circuit, in In re Collins, No. 10-20658 (5th Cir. August 15, 2011), upheld the lower courts’ findings that Wells Fargo was not entitled to attorney fees for filing a proof of claim where it disputed the amount of the debt as listed in the debtor’s proof of claim. The lower courts found that interpretation of the Deed of Trust did not support Wells Fargo’s position, see In re Collins, No. 07-38246, 2009 Bankr. LEXIS 1554 (Bankr. S.D. Tex. June 8, 2009), aff’d sub nom. Wells Fargo Bank, N.A. v. Collins, No. H:09-2483, 2010U.S. Dist. LEXIS 85195 (S.D.Tex. Aug. 19, 2010). In affirming, the Fifth Circuit explained that it found no reversible error in that conclusion. NACBA assisted with the debtor’s brief.