The Chapter 13 Rights and Responsibilities Agreement (RARA) Form Allows For What?!

When the Law Offices of M. Jonathan Hayes merged with Simon & Resnik in 2012 (has it really been 5 years!?) I began to work exclusively on petitions filed under my beloved chapter of the Bankruptcy Code, 11.  I recently began to again work on Chp. 13 cases, albeit on a fairly limited basis, and I am continually amazed at the differences between these two most popular reorganizing chapters of the code.

Take a look at the “no-look” fee form we use here in the Central District, the Rights and Responsibilities Agreement between Chapter 13 Debtors and their Attorneys (“RARA”) [court form F3015-1.7.RARA], specifically pages 5-6 (I have added emphasis):

The guidelines in this district for payment of costs incurred in performing the services described in bold face type in this agreement (“Included Costs”) and attorneys’ fees in chapter 13 cases without a detailed fee application provide for the following maximum Included Costs and fees for the services described in this agreement in bold face type (that is, the services described on pages 3 through 5 of this agreement)…

Other than the initial retainer, the attorney may not receive fees directly from the Debtor prior to confirmation. All other fees due through confirmation shall be paid through the plan unless otherwise ordered by the court.

Ok, makes sense so far. You get paid before the case is filed and then the Chp. 13 Trustee sends you any any additional fees that you are entitled to (per the RARA) from the plan payments she collects.

If the attorney performs tasks on behalf of the Debtor not set forth in bold face, the attorney may apply to the court for additional fees and costs, but such applications will be reviewed by both the chapter 13 trustee and the court…

In either event, the attorney shall disclose to the court in the fee application any fees paid or costs reimbursed by the Debtor and the source of those payments. The attorney may receive fees for such additional services directly from the Debtor. Any fees received directly from the Debtor will be deposited in the attorney’s trust account until a fee application is approved by the court.

WOW, you can do what in a Chp. 13 case per the RARA?  This is a MAJOR difference between Chp. 11 and 13 as one of the tenements of Chp. 11 is that counsel cannot receive funds from the debtor postpetition without first obtaining approval from the court (i.e., an employment application which asks for permission to accept a postpetition retainer or a fee application).

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