Cancelling filing of Chapter 7 AFTER engaging an attorney

[missjean]

Hi all!

You guys helped me successfully file a pro se chapter 7 a few months ago and I hope that you can answer a question for me.

My brother and sister-in-law decided to file for Chapter 7 (FINALLY!!!) after two years of lost income due to serious illness. They contacted an attorney (who gave them a free consultation), and contracted with him to handle their case. The attorney quoted them a fee of $1725. They have been paying him in installments and have paid him $1200.

My sister-in-law's grandmother died three weeks ago. She has left my sister-in-law $35,000 in cash and 1/3 interest in her home (which is valued at about $220,000.

They were going to discharge about $40,000 in debt. Now, they have no desire to go forward with the bankruptcy filing. Do you think that they can get back any of the money paid to the attorney?

Thank you for your input!

[free2breathe]

Well, let me just edit my original comment, because I read it totally wrong. Since they haven't actually had the petition filed, they should be able to contact the attorney and let him know they don't want to go forward.

Hopefully they can get the money back since he hasn't filed their petition. Does any of the paperwork the attorney gave them address refunds at all?

[tcreegan]

You had good news and bad news on Grandma....sorry for your loss.

Getting out of a Ch 7 is not a simple matter. You have to file for dismissal and 'show cause' (why you want out) and a BK judge decides. OR, you do not give your tax returns and/or whatever documents are required to the trustee. Trustee can dismiss your case. Or do not take the money managemenet class and get your case dismissed that way.

Do you think that they can get back any of the money paid to the attorney? probably not, he has held up his end of the bargain, and will do a little more work to get the case dismissed properly. If he is Mr Nice Guy of the year, he could write off the last payment. But he has done a lot of work so far, and needs to be compensated for that.

Well, some good news coupled to some bad news,

Tom in Colo

[debee]

I got the impression (perhaps mistakenly) that the OP's brother hadn't filed yet. The lawyer hasn't been paid yet and I thought they never did anything until they squeezed out every last penny beforehand.

[gmk]

I also read that they haven't filed the petition yet. If the attorney hasn't done a whole lot except cash checks then it's up to the attorney how reasonable he/she is about how much to return. If all he's done is the initial consult then I would expect that what's due him may be his hourly rate x the time spent in the initial consult. Since that's usually advertised as "free," I hope they get it all back. Good luck.

As an aside, every so often I read of people paying installments with a lawyer and then wanting to discontinue their services. Some get money back some don't. I think it would be a better plan to save outside the lawyer's office until you have the full amount. I realize that for many of us in this situation, it's really hard and tempting to have a few hundred or so building up in an account when you're trying to eke by, but it sure solves potential problems like this.

[ccsjoe]

Tom, OP has not yet filed, they haven't even finished paying the attorney.

OP, have them check the agreement they signed with the attorney. It should spell out exacly what they are entitle to in case of backing out. It is common for attorneys to keep some of it, especially if they have done work on your case already, such as run a means test, etc.

[despritfreya]

The above comments are quite excellent. Our fee agreement states that the fee is "earned upon receipt" therefore, technically none of the funds would be returned. However, that is not the end of the story and the recovery of some or all of the fees will depend upon the attorney. When dealing with a client who decides not to file the bk, a good attorney will only keep that portion of the fee that covers time already spent on the file and refund the balance. We do this quite frequently. The reality is that it is cheeper to "do the right thing" than to get into a fee dispute with the client and deal with the State Bar.

Des.

[missjean]

Thank you all for the rapid replies! (I knew I could count on you!). GMK, you are correct; the attorney has done nothing except cash checks. My sister-in-law referred a creditor to the attorney in an effort to get him to stop calling her at work and nothing was done. As a matter of fact, he (the creditor) started calling on a daily basis. I also thought that there would be some mention of a refund policy in the original paperwork but there is none. I guess, as you all said, that it is really up to the attorney. I will let you know what happens; they are going to speak with him sometime next week. Thanks again! (By the way, MY 60 days was up on November 3rd!!!) YAAAAAY!!!

[Protected]

You will need to read the fee agreement. Most standard fee agreements state that the "fees are earned upon receipt."

[missjean]

Hello all! I hope everyone had a pleasant Thanksgiving. I just spoke to my brother, and he was informed by his attorney's clerk that none of the money paid toward his case is refundable. (He has not heard this from the attorney himself; everytime he calls the office the attorney is with a client and can't be disturbed. I suggested that he speak to the attorney face-to-face and find out if none of the funds will be returned, but I don't know if he will). Oddly enough, the clerk told him that no money could be refunded because the attorney had already filed his petition. This is not true; I checked PACER. Also, no payment has been made since March of this year and there is a balance due the attorney in excess of $500. I doubt that the attorney has filed anything. There was no fee agreement signed when the attorney was retained. So, there is nothing in writing pertaining to the refund of any fees. Who should be contacted first: The NYS Bar Association or The Small Claims Court?

[Protected]

In your original post you said that "they contracted with him to handle their case. The attorney quoted them a fee of $1725. They have been paying him in installments and have paid him $1200." So are you saying there was no written contract with the attorney?
You need to make sure that there was no written fee agreement, because I would assume that any attorney who has a hardline policy of "no refunds" would back that up in a writing signed by the client. If there is no written fee agreement, your brother would have a valid reason to recover. Most states require attorneys to have a written fee agreement signed by the client.

However, if there is a written agreement and it states that "all funds paid are non-refundable," your brother may be out of luck recovering the fees he has already paid. You won't be able to know how this will turn out until you find out if a written agreement exits.

Anyway, even if there is a written agreement, the attorney should be fair and refund some of the fee. As far as the clerk telling your brother it was filed already, maybe it is possible that he misheard the clerk say "prepared." If in fact the petition has already been "prepared" and is waiting to be "filed" the attorney has by and large earned most of his or her fee with the exception of attending the 341 meeting of creditors with your brother.

Good Luck