In re Radzikowski

507 B.R. 798, 2014 WL 1345327, 2014 Bankr. LEXIS 1532
CourtUnited States Bankruptcy Court, W.D. New York
DecidedMarch 20, 2014
DocketNo. 12-13484 B
StatusPublished
Cited by1 cases

This text of 507 B.R. 798 (In re Radzikowski) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Radzikowski, 507 B.R. 798, 2014 WL 1345327, 2014 Bankr. LEXIS 1532 (N.Y. 2014).

Opinion

DECISION & ORDER

CARL L. BUCKI, Chief Judge.

The present dispute involves the disposition of funds that the Chapter 13 trustee held at the time of entry of an order dismissing this unconfirmed case. Seeking to recover legal fees, the attorneys for the debtors have asserted a right to payment under 11 U.S.C. § 1326(a)(2). A central issue is how to settle the rights of counsel when the retainer agreement fails to resolve payment terms to which the debtors stridently object.

Sometime in 2012, Robert and Patricia Radzikowski retained the services of the Law Offices of Peter D. Grubea. With counsel’s assistance, Mr. and Mrs. Radzi-kowski then filed a joint petition for relief under Chapter 13 of the Bankruptcy Code on November 13, 2012. With the debtors’ consent, the court thereafter entered an order directing Mr. Radzikowski’s employer to withhold a portion of his wages and to remit those sums to the trustee. These withholdings would have sufficed to fund a confirmable plan, if only the creditors had filed claims for the amounts that the debtors had listed in their schedules. Instead, with respect to the debtors’ residence, the mortgagee claimed arrears that were significantly greater than anticipated. Ultimately, the debtors declined their consent to the payment increases that would have been necessary to achieve a feasible plan. Consequently, on October 4, 2013, this court granted the trustee’s motion to dismiss this case. Although the trustee gave immediate notice of a termination of the wage order, he had already accumulated more than $3,700. In the normal course, the trustee would have returned these funds to the debtor. Before he could effect this distribution, however, the debt- or’s attorney initiated the present motion to direct the trustee to release $2,000 on account of outstanding legal fees. The trustee himself took no position on this request, but Mr. and Mrs. Radzikowski appeared in person to state their vigorous opposition.

As a general rule, the dismissal of a bankruptcy case “revests the property of the estate in the entity in which such [800]*800property was vested immediately before the commencement of the case.” 11 U.S.C. § 349(b)(3). In the present instance, however, the trustee holds only moneys that were withheld from wages earned after the date of bankruptcy filing. Because these assets were not previously vested immediately before commencement of the case, section 349(b)(3) offers no guidance regarding their proper disposition. Rather, we must turn to 11 U.S.C. § 1326(a).

Section 1326(a)(1)(A) of the Bankruptcy Code directs that a debtor in Chapter 13 shall make or arrange periodic payments to a trustee. The following text of 11 U.S.C. § 1326(a)(2) then speaks to the distribution of those funds:

A payment made under paragraph (1)(A) shall be retained by the trustee until confirmation or denial of confirmation. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan as soon as practicable. If a plan is not confirmed, the trustee shall return any such payments not previously paid and not yet due and owing to creditors pursuant to paragraph (3) to the debtor, after deducting any unpaid claim allowed under section 503(b).

Section 503(b) accords administrative status to certain claims, including “compensation and reimbursement awarded under section 330(a) of this title.” 11 U.S.C. § 503(b)(2). The Grubea firm contends that its claim for legal fees is allowable under section 330(a), so that the trustee may pay those fees prior to any distribution to the debtor under section 1326(a)(2).

Sections 1326(a)(2) essentially authorizes the trustee to pay a claim for legal fees that have been “allowed.” At the time that this court granted an order of dismissal, however, the Grubea firm had not even submitted an application for allowance of its claim. Bankruptcy Courts are divided on whether they can still approve legal fees at this late stage of the current proceeding, that is, subsequent to entry of an order of dismissal. Compare In re Garris, 496 B.R. 343 (Bankr.S.D.N.Y.2013) and In re Harris, 258 B.R. 8 (Bankr.D.Idaho 2000) with In re Lewis, 346 B.R. 89, 111 (Bankr.E.D.Pa.2006). We need not decide this issue, however, because the Grubea firm is not here entitled to such payment in the facé of client opposition.

The following text of 11 U.S.C. § 330(a)(4)(B) recites the controlling standard for the allowance of legal fees in the instant case:

In a chapter 12 or chapter 13 case in which the debtor is an individual, the court may allow reasonable compensation to the debtor’s attorney for representing the interests of the debtor in connection with the bankruptcy case based on a consideration of the benefit and necessity of such services to the debtor and the other factors set forth in this section.

Such other considerations would include the time spent and the rates being charged, as well as “all relevant factors.” 11 U.S.C. § 330(a)(3). In the present instance, the debtors do not dispute that the Grubea firm provided the legal services for which it now seeks compensation. Although counsel appears not to have maintained time records, the proposed allowance is actually less than the amount cited in the statement of fees that counsel filed as required under Bankruptcy Rule 2016. Rather, the debtors assert their understanding that any fee balance would be paid only through a confirmed plan. Because no plan was ever confirmed, Mr. and Mrs. Radzikowski believe that their counsel has no right to an allowance under 11 [801]*801U.S.C. § 330(a) or to a distribution under 11 U.S.C. § 1326(a)(2).

In reviewing an application for fees in a complex case, this court will carefully consider the record of time spent by each professional. See 11 U.S.C. § 330(a)(3)(A). The typical consumer case is different. Counsel for consumer debtors will frequently not maintain any contemporaneous time records but may instead charge a flat fee that takes into account the risks of collection. For many Chapter 13 cases filed in the Western District of New York, the debtors and their attorneys have agreed that some portion of the legal fee will be paid through the Chapter 13 plan. To the extent that debtors fail to complete a plan, lawyers will generally forgive any outstanding fee balance. Indeed, 11 U.S.C. § 330(a)(4)(B) suggests the reasonableness of this understanding, in as much as the allowance of fees in Chapter 13 is substantially based upon “the benefit ...

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Cite This Page — Counsel Stack

Bluebook (online)
507 B.R. 798, 2014 WL 1345327, 2014 Bankr. LEXIS 1532, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-radzikowski-nywb-2014.