A fee only chapter 13 plan is one in which there is zero or very little money to pay creditors in a chapter 13 plan. It is not to be confused with a zero percent plan where secured and priority creditors are paid, but general unsecured creditors get nothing. Why would anyone propose such an arrangement? The answers may vary, but usually it is because a debtor needs the relief NOW. However, they lack the resources to come up with the fees to pay for a competent attorney. So they file chapter 13 and the payments can extend past the date the petition is filed.
In 2004 the US Supreme Court ruled that debtor attorney fees couldn’t be paid from the chapter 7 estate. In English that means after filing the petition. This ruling can have the impact of squeezing the desperate, but honest and penniless debtors out of the process. To fix this some attorneys file chapter 13, which has zero dollars to pay creditors in the plan. The plan payments just go to attorney fees and trustee fees. At law this is called a fee only plan. Many courts have held these plans to be in bad faith and refuse confirmation and fee payment because creditors get zilch.
Enter Jed Berliner. Jed is a bankruptcy attorney in Massachusetts. He is a true believer. Check out the movie of the same name. Of the hundreds of thousands of lawyers in this country, only a fistful in each field can be called true believers. These are the ones who mount a legal fight because the issue needs to be fought. He is a true believer that the system is there for everyone.
Jed filed a fee only chapter 13 plan. The court ultimately forced conversion to chapter 7. Jed filed a motion to have his fees awarded. The court held he was only entitled to a pittance because fee only chapter 13 cases are per se filed in bad faith. Jed pushed back. He appealed twice. Once to the district court and then to the court of appeals. With help from NACBA he won a ruling overturning the per se bad faith rule. The issue of amount of fees still needs to be decided by the bankruptcy court.
The simple fact is that Jed Berliner saw an injustice and fought to make it right. At least in his home Commonwealth of Massachusetts, Puerto Rico and the States of Maine, New Hampshire, and Rhode Island fee only chapter 13 cases are more of a reality for debtors who truly need real help, but cannot afford what it costs to have their bankruptcy done right.
This is the final installment of my bankruptcy alphabet. I could not think of a better way to end it than by paying tribute to a hero who opened the courthouse door just a little wider for penniless debtors in need.
Other attorneys who have stayed the course and finished out the bankruptcy alphabet:
- Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell
- Jacksonville Bankruptcy Attorney, J. Dinkins G. Grange, Esquire
- Bay Area Bankruptcy Lawyer Cathy Moran
- New York City bankruptcy attorney Jay S. Fleischman