After Debtors Voluntarily Dismissed Chapter 13 Case, Court Approved Attorney’s Fee Application as Administrative Expense to be Paid from Funds Held by Chapter 13 Trustee

After Debtors Voluntarily Dismissed Chapter 13 Case, Court Approved Attorney’s Fee Application as Administrative Expense to be Paid from Funds Held by Chapter 13 Trustee

Seeking relief from mounting business debts, the Debtors retained Attorney Parker to file a joint Chapter 13 bankruptcy. After Debtors voluntarily dismissed their case—and three days before filing Chapter 7 on their behalf-Attorney Parker submitted an application for pre-confirmation attorney fees. The Chapter 7 Trustee and a creditor object. They contend that the $7,762.56 being held by the Chapter 13 Trustee is now property of Debtors’ Chapter 7 estate; the attorney fee is a dischargeable debt in the Chapter 7 case; and, although Attorney Parker did the work, he does not have an administrative expense claim that can be paid from property of the Chapter 7 estate.

A creditor and the Chapter 7 Trustee object to the application for compensation. Although neither party argues that the fees sought are unreasonable, they contend the fees are no longer collectable from the funds on hand in the Chapter 13 bankruptcy because that case has been dismissed; therefore, the fees must be treated as any other unsecured claim in the Chapter 7 bankruptcy. The Court focuses on the timeliness of the application and whether or not Attorney Parker is entitled to payment from the Chapter 13 Trustee.

The Court has jurisdiction under 28 U.S.C. § 1334(b). Notwithstanding the dismissal of this case, the Court retains jurisdiction to adjudicate issues related to compensation of professionals. Dery v. Cumberland Cas. & Sur. Co. (In re 5900 Associates, Inc.), 468 F.3d 326, 330-31 (6th Cir. 2006). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A)-(B).

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