Summary:
The Court held that Harris v. Viegelahn, 575 U.S. ___, 135 S. Ct. 1829, 191 L.E. 2d 783 (2015) did not prevent a Chapter 13 trustee from paying administrative expenses funds held by the following conversion of the case to Chapter 7 pursuant to 11 U.S.C. § 1326(a)(2) and Bankruptcy Rule of Federal Procedure Rule 1019.
Commentary:
Attached to the application for fees was an affidavit from the debtor stating that she understood that the funds on hand could be returned to her but that she nonetheless wanted those funds sent to the her attorney. This makes it unclear whether the debtor's attorney could compel the chapter 13 trustee to release funds to her in the face of an objection from the debtor.
Additionally, this order does not address Rule of Professional Conduct 1.8, which prohibits, among other things, an attorney from taking a "pecuniary interest directly adverse to a client" unless such is reasonable, in writing, and the client has been advised in writing of the advisability of seeking and given a reasonable opportunity to obtain independent legal counsel regarding the transaction. These requirements are meant to provide additional protection for clients, and while other additional protections are in place due to the bankruptcy court supervision, it would seem advisable to comply with these requirements also.
See also: In re Pace
For a copy of the opinion, please see:
Lucero- Payment of Administrative Expenses Following Conversion from Chapter 13 to Chapter 7
Blog comments