Legal fees are always a touchy subject. Many people think that overall, lawyers charge too much and bill at absurd hourly rates. There may be some truth to that, but bankruptcy attorneys are usually the exception. Most consumer bankruptcy matters are billed at a flat fee rather than on an hourly basis. If I charged my clients on an hourly basis, my fees would likely be double that flat fee. In short, legal fees for consumer bankruptcy matters are a delicate balance between what a client can reasonably afford, fair payment for the value of service and benefit the client receives, and some reduced fee that an attorney will accept without devaluing his or her services.
There will always be attorneys who charge more and others who charge less. I caution anyone who considers a bargain-priced attorney for something as specialized as bankruptcy, because they likely don’t know all the work involved; or you will get exactly what you pay for and potentially find yourself in a worse position. I recognize that most of the clients retaining me are facing financial hardship and I’m not looking to create a new one.
If an attorney is grossly overcharging for his or her services the bankruptcy court will have the final say on those fees. As part of a bankruptcy petition, an attorney is required to document the services provided and the fees charged (and paid) by a debtor. If those fees are thought to be excessive, the court will hold a hearing requiring that attorney to justify such fees. If the fees are determined to be excessive, a bankruptcy judge may order funds returned to the debtor.
One recent case out of the Southern District of New York demonstrates that the courts do look after debtors to ensure that no one is trying to take advantage. This was a fairly routine Chapter 13 case where the debtor was represented by a well-known Manhattan law firm. The firm does solid work but typically does not handle cases this small.
The firm sought compensation in excess of $124,000 for their work on this case. In their fee application, they alleged that they spent over 265 hours working on this case. This was a case in 2019 that was on the verge of dismissal and I believe the debtor had passed away. While I am not familiar with the full history of this particular case I have never spent 265 hours on any single Chapter 13 case, even over the course of the entire five-year plan. Even the Chapter 13 trustee opposed the application arguing that the fees were unreasonable. Suffice it to say that Judge Cecilia G. Morris was not convinced that this fee was reasonable or necessary.
One of the highlights of some of the consumer bankruptcy continuing legal education seminars is the discussion of some of the most ridiculous cases and things that people have tried to pull off, only to be denied by bankruptcy judges. I’ve heard of fees in the tens of thousands for routine consumer cases (again, significantly higher than any attorney I know charges). Once that gets to a judge by the suggestion of a debtor, bankruptcy trustee, or United States Trustee’s office, that attorney is going to have a lot of explaining to do.
For more information on whether bankruptcy is right for you, please feel free to reach out. We would be happy to set up a consultation and review your case. At that time we can quote you a reasonable fee for our services.
Zimmelman Law PLLC
Latest posts by Zimmelman Law PLLC (see all)
- New York State Foreclosures To Quickly Proceed After NY Court Of Appeals Ruling - February 17, 2023
