Bankruptcy Protects Debtors From Unreasonable Attorney Fees

Bankruptcy and Unreasonable Attorney Fees

Besides the fear of affordability, many debtors fear that the fees charged for their bankruptcy case may be unreasonable.  Fortunately, the bankruptcy code has anticipated the need to protect debtors from unreasonable attorney fees.

Below we examine what is considered unreasonable and how debtors are protected:

Freedom From Excessive Fees

Section 329 of the Bankruptcy Code gives the bankruptcy court the power to determine the reasonableness of attorney fees.  How does this play out in a typical bankruptcy case?  The bankruptcy attorney must disclose to the court what they charged the debtor.  The bankruptcy court then looks at the fees and determines whether or not the fees could be considered excessive. If they are determined to be excessive, the debtor is only obligated to pay what is reasonable.  Just the threat of this happening keeps most reputable bankruptcy attorneys from overcharging.

What Is Considered Excessive?

There is no rock solid standard for determining excessive fees.  Many factors go into determining what is excessive and what is reasonable.  A complex Chapter 13 bankruptcy case is going to cost significantly more than a simple Chapter 7 bankruptcy .  And depending on the bankruptcy attorney’s skills and experience, higher fees may be justified.  When examining a case which the bankruptcy court suspects has excessive attorney fees, they will examine what exactly the attorney did for the debtor.  Did they file the petition correctly? Did they solve difficult problems?  Did they provide solid bankruptcy strategies?

If a bankruptcy attorney is accused of charging excessive fees, the burden of proving that the fees are reasonable fall on them, not on the debtor.  Because of these types of protections, the bankruptcy debtor doesn’t have much to fear in terms of being overcharged for an attorney’s services.