Chicago Bankruptcy Lawyer If you search for a Chicago bankruptcy lawyer, you are going to find a wide range of talent, fees, experience, demeanor and success. You will find everything from the entry-level attorney who is trying to help his first client all the way to the seasoned attorney who is closing in on retirement+ Read More The post All Chicago Bankruptcy Lawyers Are Not Created Equal! appeared first on David M. Siegel.

Recently I attended a CLE seminar in which the learned professor discoursed on the difference between a metaphor and a simile.   A metaphor is a statement which is not literally true but (for example, you never see a wolf actually wearing sheep's clothing) but conveys a truth through comparison.     This discussion came in handy when I came across the following pleading filed by Western District of Texas Trustee John Patrick Lowe who used Whistler's first nocturne as an extended metaphor for the disclosure provided to him in the case.  I provide the pleading for you in its entirety. Case Summary It's Whistler's first "nocturne", created in 1871 when he was only 37 years old.  The viewer is on the Battersea bank of the river Thames in London at night looking across to Chelsea on the other bank. A stylized barge is on the river. Lights on the far side of the river reflect across the river surface. And a figure, also stylized, appears on the near bank. An example of what Whistler called "art for art's sake". No lesson of any sort, religious, moral, ethical or otherwise, nothing informative, nothing historical.Only something created for the thrill of it. And for the thrill created in certain viewers. It's also an example of the manipulation of facts, the suppression of some facts and the enhancement of others. Suppressed were the range of a normal pallette, what with blue, blue, blue but with minor hints of black to distinguish outlines and yellow to depict the reflection of lights on the river Thames. A hundred years later and without the detail it could very well be a "Blue Rothko". Also suppressed were details, something which would enable the viewer to tell where we are, what time of day it is or what's we're looking at. None of the bustle or activity of the day. No buildings really. And one's sense of proportion is put off by the size of the figure in relation to the barge and to objects on the far bank. Enhanced were color, mood, atmosphere. The picture is nothing if not atmospheric.Paragraph 10 of the Debtor's Statement of Financial Affairs discloses her transfer of interests in real property in Orange and Tyler Counties, Texas to her daughters in May and August of 2012, less than two years prior to the commencement of the case.  Those statements and her testimony at the meetings of creditors were also an example  in the enhancement and suppression of facts. Suppressed were evidence of the value of the interests, the presence in the chains of title of, not necessarily oil and gas leases, but instruments disclosing oil and gas companies' intent to engage in seismic activity with respect to some of the interests, the brutal and extremely material fact that her daughters had peddled on most of what they'd acquired from their mother, the Debtor, shortly after having acquired those interests. Enhanced were her medical condition and the medical conditions of several family members, financial hardship, divorce and the so-called lack of any value to the interests, their extreme "sentimental value" to the family. The interests had been in the family for years and should stay in the family for years, the Trustee was told.The Trustee had to interpret these stylized facts; adjust his point of view; use his imagination. He discovered the facts which had been suppressed: oil and gas activity; real objective value attributable to the mineral estates; real objective value attributable to the surface estates; the lack of sentimental value as perceived by the Debtor's daughters; the recent resale of most of the interests for dramatically increased prices.  And ignored the facts which had been emphasized. And at the end of the day, the Trustee had settled the estate's claims to avoid the transfers and recover the transferred interests for an amount sufficient to pay all allowed creditors claims a 100% dividend plus post-petition interest.The Trustee's final report before distribution also proposes a small surplus distribution to the Debtor, her fee, as it were, for having created this beguiling work. Art for art's sake. Case No. 13-11741, Dkt. #25 (Bankr. W.D. Tex. 6/5/14).

Medical Debt There is no question that a chapter 7 bankruptcy case will eliminate medical debt. However, if you only have one debt, you may not need to file bankruptcy at all. This is all going to depend upon the aggressiveness of the debt collector as well as your tolerance for ongoing collection efforts. In+ Read More The post I Have One Huge Medical Debt. Is Bankruptcy The Answer? appeared first on David M. Siegel.

A common question that comes up when clients are considering chapter 7 bankruptcy is what impact bankruptcy will have on IR As and other retirement accounts. When we file your chapter 7 bankruptcy, we have the opportunity to use what are termed “exemptions” under the U.S. and Arizona bankruptcy laws. The post IR As and Bankruptcy appeared first on Tucson Bankruptcy Attorney.

Food and clothing in the bankruptcy means test One of my jobs as a bankruptcy lawyer is to make you look good on the bankruptcy means test. Here in Northern Virginia, I claim an extra 5% on your food and clothing allowance.  The bankruptcy means test law talks about that 5% in 11 USC 707(b)(2)(A)(ii)(l). […]The post Bankruptcy Means Test: 5% Additional for Food and Clothing by Robert Weed appeared first on Robert Weed.

Chicago Bankruptcy Trustee In certain circumstances a Chicago bankruptcy trustee can take your tax refund. It all depends however on the facts of the case. Let’s start with the chapter 7 situation. If you receive your tax refund prior to your chapter 7 bankruptcy case being filed and you exhaust that refund prior to the+ Read More The post Will The Chicago Bankruptcy Trustee Take My Tax Refund? appeared first on David M. Siegel.

A recent client came to see me many months back to talk about potentially filing for bankruptcy. He was not even thinking about a bankruptcy release at that time. This person knew that he had debt, but he was reluctant to file for some reason. Many people think that if they just keep avoiding lawsuits+ Read More The post Will Bankruptcy Release The Freeze On My Bank Account? appeared first on David M. Siegel.

If you are a struggling homeowner and have not yet found relief, you should pay close attention on Thursday, June 26th. The U.S. Treasury Secretary, Jacob J. Lew, will be announcing expanded programs to help homeowners and renters. Help for homeowners to stay in their homes and help for renters to obtain home loans in+ Read More The post Help For Homeowners Announcement From The Treasury Coming June 26th appeared first on David M. Siegel.

If you are in Chapter 13, the vehicle operating budget you are allowed will be too small. That’s (almost) a mathematical certainty.   Here’s why. The census bureau shows–no surprise–that people who are working spend on average double on transportation gasoline and maintenance than people who aren’t.    (For more, see this from the American […]The post Chapter 13: Your vehicle operating budget is too small. by Robert Weed appeared first on Robert Weed.

While the Fifth Circuit has yet to definitively address the quirky Pro-Snax opinion, a new decision provides some helpful guidance on recovering attorneys' fees in bankruptcy.    ASARCO, LLC v. Jordan Hyden Womble Culbreth & Holzer, P.C. (Matter of ASARCO, LLC), No. 12-40997 (5th Cir. 4/30/14).    You can read the opinion hereWhat HappenedASARCO was a copper mining, smelting and refining company.  It used to have a really big smokestack in my home town of El Paso, but that's another story. Two years before bankruptcy, ASARCO's parent, Americas Mining Corporation (AMC), directed ASARCO to transfer a controlling interest in Southern Copper Corporation to it.   After ASARCO filed chapter 11 in 2005, its attorneys, Baker Botts and Jordan Hyden Womble Culbreth & Holzer, filed a fraudulent transfer action against the parent company.    The attorneys did a really good job.   They recovered a judgment valued at between $7-$10 billion which, according to the Fifth Circuit "was the largest fraudulent transfer judgment in Chapter 11 history."    When ASARCO sought to monetize its judgment, AMC decided that it would be cheaper to fund the company's reorganization instead.   As a result, ASARCO emerged from bankruptcy after just  52 months with "little debt, $1.4 billion in cash, and the successful resolution of its environmental, asbestos and toxic tort claims."    You would think that everyone would be very happy with the work done by the attorneys.    The two firms applied for their lodestar fees plus a 20% enhancement as well as their expenses for preparing and litigating their fee applications.    ASARCO, which was now under the control of its parent, challenged the fees.   One discovery request sent to Baker Botts requested every document that the firm had produced during the bankruptcy case.   This resulted in production of 2,350 boxes of documents plus 189 GB of electronic data.    After a six day trial, the Bankruptcy Court awarded Baker Botts $113 million in fees plus an enhancement of $4.1 million for the work performed on the fraudulent conveyance case.   Jordan Hyden recovered $7 million in fees as well as an enhancement of $125,000.   The Court also awarded fees for defending the fee applications, which amounted to $5 million for Baker Botts and $15,000 for Jordan Hyden.   The District Court affirmed.The Fifth Circuit's RulingThe Fifth Circuit affirmed the enhancements but denied the fees for defending the fee applications.   Its analysis recapped the three-pronged approach adopted by the Court in In re Pilgrim's Pride Corp., 690 F.3d 650 (5th Cir. 2012) in which the Court held that fees should be determined under a combination of the lodestar approach, the factors specified in 11 U.S.C. Sec. 330(a) and the twelve factors from Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974).    The Court explained thatSection 330(a), the lodestar method, and the Johnson factors work in conjunction with each other to guide the court's discretion.Opinion. p. 6.   The Court further explained that the lodestar calculation (reasonable rates multiplied by a reasonable number of hours) provides the starting point for the analysis and that the lodestar amount can be adjusted up or down based upon the other factors.    The fact that the lodestar can be adjusted up provides the analytical basis for fee enhancements in "rare and extraordinary cases."   The Court rejected challenges from ASARCO that fee enhancements could never be allowed, that enhancements had to be approved by the client and that enhancements could only be allowed where there was a "plus factor" in addition to extraordinary results.   The Court also considered whether Baker Botts's fees were "below market" as found by the Bankruptcy Court.   The firm's blended rate was $353.98 per hour with partners charging $365-$800 per hour and associates billing $$195-$525 per hour.   The Court ruled that because "reasonable attorneys' fees in federal court have (not) been 'nationalized,'" it was improper to look at fees charged in other circuits.   Opinion, p. 10.   Nevertheless, the Court found that the Bankruptcy Court's finding was supported by enough evidence to survive clear error review.   Indeed, the rates charged by Baker Botts were less on a blended rate basis than any of the other firms in the case.   See In re ASARCO, LLC, 2011 Bankr. LEXIS 5487 (Bankr. S.D. Tex. 2011).However, the Court was not persuaded by the award of fees for defending the fee application.   The Court stated:We conclude that, correctly read, Section 330(a) does not authorize compensation for the costs counsel or professionals bear to defend their fee applications.Opinion, p. 13.   The Court based this ruling on the language of section 330(a), which expressly allows fees for preparing a fee application but not for defending one.  Parties in interest as well as the United States Trustee are entitled to receive notice and the opportunity for a hearing to question bankruptcy professional fees. Section 330(a)(1). Implicit in this procedure is the possibility of fee litigation. Nevertheless, Section 330 states twice, in both positive and negative terms paraphrased above, that professional services are compensable only if they are likely to benefit a debtor’s estate or are necessary to case administration. Matter of Pro-Snax Distributors, Inc., 157 F.3d 414, 418 n.7 (5th Cir. 1998). The primary beneficiary of a professional fee application, of course, is the professional. While the debtor’s estate or its administration must have benefitted from the services rendered, the debtor’s estate, and therefore normally the creditors, bear the cost. This straightforward reading strongly suggests that fees for defense of a fee application are not compensable from the debtor’s estate. The Eleventh Circuit adopted this interpretation in a factually similar case, holding that “. . . the issue is whether the services rendered were reasonable and necessary to the administration of the estate. [internal citation omitted] The answer to this question is no. The subject of the [appeal and cross-appeal] was the fee to be paid to [the professional] for his services rendered in the administration of the estate. The appeals brought absolutely no benefit to the estate, the creditors, or the debtor.”(citation omitted).   Further supporting this interpretation is Section 330(a)(6), which limits potential professional fees in two ways. First, the specification of an award for “preparation of a fee application” is clearly different from authorizing fees for the defense of the application in a court hearing. Second, tailoring the award to the “level and skill reasonably required to prepare the application” emphasizes scrivener’s skills over other professional work. It is untenable to construe this language alone to encompass satellite litigation over a fee application. Had Congress intended compensation for professional fee applications to be allowable as “reasonable and necessary” under Section 330(a)(3)(C), there would have been no need to create the limits specified in subdivision (4). The broad reading of Section 330(a)(3)(C) urged by Baker Botts would render Section 330(a)(4) superfluous.Opinion, pp. 13-14.   The Court then explained how the American rule weighed against fees for defense.Because Congress designed fee shifting provisions in express derogation of the American Rule that each party to litigation bears its own costs, the losing party should bear the full costs of counsel for the winner. In bankruptcy, the equities are quite different. Both the debtor and creditors have enforceable rights, and there is a limited pool of assets to satisfy those rights and compensate court-approved professionals; in certain cases, moreover, professionals paid from the debtor’s estate represent competing interests. No side wears the black hat for administrative fee purposes. In the absence of explicit statutory guidance, requiring professionals to defend their fee applications as a cost of doing business is consistent with the reality of the bankruptcy process. The perverse incentives that could arise from paying the bankruptcy professionals to engage in satellite fee litigation are easy to conceive.  (emphasis added).Opinion, p. 16.The Court dismissed the argument that denying fees for defense of a fee application would encourage excessive fee litigation with the comment thatToo frequently, court-appointed counsel for debtor[’s] and the official creditor committees’ interests in a case, sharing the mutual goal of securing approval for their fees, enter into a conspiracy of silence with regard to contesting each other’s fee applications. (citation omitted).Opinion, p. 18.  Nevertheless, the Court allowed that fees for defense could be allowed where "an adverse party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons."   Opinion, p. 19.Thus, the final result was that Baker Botts was able to retain its enhancement of $4.1 million but lost its fees for defense of $5 million.   Jordan Hyden fared slightly better, retaining its enhancement of $125,000 while having $15,000 in cost of defense fees cut.   The Court tried to place this loss in context, stating:In this case, the huge cost of defending Baker Botts's core fees seems a drastic reduction in absolute terms, but it amounts to only about 4.4% of the core fee.Opinion, p. 17.   Thus, the message to Baker Botts from the appellate court was you did an amazing job, but you still have to pay the cost of proving that you did an amazing job.Take-Aways from the OpinionWhile this opinion addresses two very discrete issues, the extensive discussion contains some important lessons about attorneys' fees in bankruptcy.The accolades heaped upon Baker Botts are a measure of respect for the bankruptcy profession.   Even though Baker Botts plays in a more rarified world than the average bankruptcy practitioner, recognition for one bankruptcy professional is approval for the profession as a whole, just as incompetent, dishonest or mercenary behavior by bankruptcy lawyers tends to diminish it.    The Fifth Circuit has re-affirmed the unique amalgamation of three tests first announced in Pilgrim's Pride.   Professionals litigating attorneys' fees in the Fifth Circuit cannot simply rely on the language of the statute, but should consider whether the other two tests enhance or detract from their position.The Court's comments about national vs. regional fees reflect a compromise position between the efficiency of administration standard under the Bankruptcy Act and the "greed is good" mantra of Gordon Gecko.    While bankruptcy is no longer the poor stepsister of the legal practice, professionals cannot charge amounts exceeding the local prevailing rate simply because that is what they charge in some other, more expensive jurisdiction.The Fifth Circuit mentioned Pro-Snax, but not for its most infamous holding.   While the lower courts have struggled to implement the "tangible, identifiable and material benefit" standard, the Fifth Circuit has not revisited this language since its 1998 debut.   In this opinion, the Court mentioned one of Pro-Snax's less controversial statements that fees must be likely to benefit the estate or necessary to administration in order to be compensable.  This may be a signal from the Circuit that it will focus on the parts of the opinion that are uncontroversial while de-emphasizing the questionable language.     The Court recognized that challenging another professional's fees, while distasteful, is an important part of the process.   The Court's warning against the "conspiracy of silence" as well as its no black hats in fee litigation suggest that professional fees should be exposed to the same adversary process as other facts required to be determined by the courts.   While it may be easier to let the U.S. Trustee or the bankruptcy court do the heavy lifting, the parties will often have the most knowledge and incentive to develop the record.