Minimum Percentage Paid to Unsecured Creditors is Not a Factor in Determining Reasonable of Chapter 13 Counsel’s Fees

Minimum Percentage Paid to Unsecured Creditors is Not a Factor in Determining Reasonable of Chapter 13 Counsel’s Fees

On October 5, 2017, the court delivered an oral opinion sustaining an objection filed by the chapter 13 trustee to the confirmation of the plan of Kenneth L. Jarrett, Sr. The debtor’s chapter 13 plan provides for the allowance of a fee of $3,750 for the debtor’s attorney, Mr. Ken Rannick. The trustee objected to confirmation of Mr. Jarrett’s plan on the basis that the fee is excessive and should not be allowed because, among other things, unsecured creditors will be paid a small percentage of the funds paid into the case.

In its oral opinion, the court discussed the history of the case, the requirements of the applicable statutory provisions related to approval of a fee in a chapter 13 case, the requirements of Fed. R. Bankr. P. 2016, the relevant case law in this circuit, and the provisions in LBR 2016-1. The court recently provided a detailed analysis of these applicable rules to the allowance of a chapter 13 fee in the case of In re Pursley. Because the debtor’s attorney did not have the benefit of the In re Pursley opinion before providing the evidence in support of his fee, the court allowed the debtor’s attorney to supplement his filings in this case to demonstrate the reasonableness and necessity of his requested fee of $3,750. The debtor’s attorney has filed a supplemental brief, and the chapter 13 trustee has filed a response.

In this case, the trustee challenged the fee request on the basis that the fee, if allowed, would take a substantial percentage of the total amount paid into the case. After paying the secured debts, the trustee states there will be $5,894 available to unsecured creditors. Debtor’s counsel has requested a fee of $3,750, which is estimated to be about 64% of the total amount payable to unsecured creditors. The trustee’s counsel argued that Debtor’s counsel’s fee should be $2,894 or approximately 50% of the remainder.

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