E.D.N.C.: Summitbridge v. Faison- No Unsecured Claim for Attorneys Fees for Under Secured Creditor

Summary:

In a Chapter 11 case, Summitbridge held a secured (but under secured) claim, which was satisfied, pursuant to the confirmation order, by tender of the collateral. Summitbridge then filed an additional unsecured, nonpriority claim for it attorneys fees, pursuant to its promissory note, in the amount of 15% of the outstanding indebtness, totaling more than $300,000. The bankruptcy court disallowed this unsecured claim.

In affirming, the district court recognized the line of cases that “reasoned that claims for post-petition attorneys’ fees are contingent, unliquidated claims which are not precluded by Section 502 and are thus allowable. See In re 804 Congress, L.L.C., 756 F.3d 368 (5th Cir. 2014), on remand, 529 B.R. 213 (Bankr. W.D. Tx. 2015); In re SNTL Corp., 571 F.3d 826, 842 (9th Cir. 2009); In re Welzel, 275
F.3d 1308 (11th Cir. 2001)); see also Ogle v. Fid. & Deposit Co. of Maryland, 586 F.3d 143, 148
(2d Cir. 2009). As none of these were precedent, the district court nonetheless agreed with the bankruptcy court, since the express allowance of post-petition attorneys fees to unsecured creditors in some circumstances indicates that the lack of express allowance in others is not permitted. To allow attorneys fees for an under secured creditor would render the restriction in 11 U.S.C. § 506(b) superfluous. It would also diminish the distribution to other unsecured creditors.

Commentary:

While this was a Chapter 11 case, there is no reason that it should not equally apply in Chapter 13 cases. That would have the effect of precluding the allowance of attorney’s fees for under secured creditors under 11 U.S.C. § 506(b). (Or for those for which, pursuant to the Hanging Paragraph of 11 U.S.C. § 1325(a), U.S.C. § 506 does not apply.) First among these would be most liens secured by cars or other personal property, which more often than not is underwater. The standard practice of allowing creditor’s attorneys fees and costs in the resolution of a Motion for Relief should be questioned and denied, absent some other statutory basis, such as § 330 (a)(4)(B), which allows payment to of fees for the debtor’s attorney, or § 1322(e), which allows for contractual fees in a plan curing a default. (Since §1322(e), is not, unlike §1322(a), (b), and (c) or §1325(a), incorporated in the provisions for modification under §1329, it should not serve as a basis for allowance of post-petition attorney’s fees for a secured creditor following a proposed cure of a post-petition default.)

For a copy of the opinion, please see:

Summitbridge v. Faison- No Unsecured Claim for Attorneys Fees for Under Secured Creditor

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993.

2. Juris Doctor degree from George Washington University, 1996.

Admissions to Practice of Law:

North Carolina Bar, 1996.
Federal District Courts for the Eastern and Middle Districts of North Carolina.

Specialty Certification:

North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy.

Areas of Practice:

Practice limited to consumer and business debtor bankruptcy law, 1998 to present.

Memberships:

National Association of Consumer Bankruptcy Attorneys (NACBA).
North Carolina Academy of Trial Lawyers (NCATL).
North Carolina Bar Association, Bankruptcy Section.

Lectures prepared and presented:

North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court – C.Y.A. Forms to Help ‘Gird They Loins’; 2001.
Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002.
NACBA National Convention; Topic: Efficient Office Practices; 2003.
NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004.
Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004.

Positions held:

NACBA National Convention; Convention Chair; 2008.
NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008.
NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007.
NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007.
NACBA, Member of National Board of Directors, 2006 to present.
NCATL, Chair of the Bankruptcy Section, 2003 to 2007.
NACBA, Chair of the North Carolina Section, 2003 to 2007.
NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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