Shekima T. Lewis

UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re 	: 	CHAPTER 13
:
SHEKIMA T. LEWIS, 	:
: 	Bankruptcy No. 04-36778KJC
Debtor. 	:
MEMORANDUM IN SUPPORT
OF ORDER PURSUANT TO
LOCAL BANKRUPTCY RULE 8001-1(b)
BY: 	KEVIN J. CAREY, UNITED STATES BANKRUPTCY JUDGE
On November 22, 2005, after hearing, this Court entered an Order (Docket No. 46)
denying the Motion to Approve the Distribution of Pre-Confirmation Payments Held by the
Chapter 13 Standing Trustee to Debtor’s Counsel for Outstanding Legal Fees (Docket No.
35)(“Motion”), which Motion was opposed by the chapter 13 trustee. I denied the Motion for
the reasons stated on the record at the conclusion of the November 22, 2005 hearing, but now
write to amplify my oral ruling in accordance with Local Bankruptcy Rule 8001-1(b).
The Motion filed by Debtor’s counsel, Jenkins & Clayman, on its own behalf, seeks a
court order determining that its attorneys’ fees be approved as an administrative expense and
directing the chapter 13 trustee to pay such funds to counsel before confirmation of a plan.
By way of background, a chapter 13 debtor is required to file a proposed plan (11 U.S.C.
§ 1321) and to commence plan payments to the chapter 13 trustee within thirty days after the
plan is filed even though a plan has not yet been confirmed. 11 U.S.C. § 1326(a)(1), See also
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1Section 1326(a)(1) and (2) provide:
(a) (1) 	Unless the court orders otherwise, the debtor shall
commence making the payments proposed by a plan
within 30 days after the plan is filed.
(2) 	A payment made under this subsection shall be retained
by the trustee until confirmation or denial of
confirmation of a plan. If a plan is confirmed, the trustee
shall distribute any such payment in accordance with the
plan as soon as practicable. If a plan is not confirmed,
the trustee shall return any such payment to the debtor,
after deducting any unpaid claim allowed under section
503(b) of this title.
This is the applicable version, in effect prior to the effective date of the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005.
2Indeed, the Bankruptcy Rule 2016(b) disclosure filed by debtor’s counsel in this case reflects
that $306.00 was received from the debtor, leaving a remaining balance due to counsel of $1,680, which
the debtor’s proposed chapter 13 plan provides is to be paid after confirmation through the chapter 13
trustee.
2
Local Bankruptcy Rule 2083-1. 1
The chapter 13 trustee must retain such payments until either confirmation or denial of
confirmation of a plan. 11 U.S.C. §1326(a)(2). Since the chapter 13 trustee is authorized to
make distributions to creditors only upon confirmation of a plan (§1326(a)(2)), none of the
bankruptcy judges in this district consider or rule upon debtor’s counsel’s fee application unless
and until a plan is confirmed. It is common in chapter 13 representations for counsel to receive
an advance on the fee, and to provide in the plan that the balance of the attorney’s fee be paid
through the chapter 13 plan.2 The problem that this can sometimes present for debtor’s counsel
is that if a chapter 13 case is dismissed before confirmation of a plan, the Bankruptcy Code
requires the chapter 13 trustee to return funds on hand to the debtor, Section 1326(a)(2). The
debtor, in turn, may not pay her attorney. The case before me was dismissed, unopposed, and
before confirmation, on the chapter 13 trustee’s motion for the debtor’s failure to make her plan
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3See Rule 2016(a) of the Fed.R.Bankr.P. and L.B.R. 2016-1, 2016-2 and 2016-3.
3
payments pursuant to Code §1326(a)(1). Many such cases are disposed of in this manner. So, in
an effort to enlist the court’s aid in collection efforts, counsel has filed this Motion.
Debtor’s counsel has filed no fee application in this case. 3 In light of this failure, the
Court may not have authority to make any award to counsel, since none has been requested.
However, whether the Motion is considered such an application or, instead, a request for
payment of administrative expense under Code §503(b), as its substance is styled, the requested
relief should be denied.
Bankruptcy Code §349(b)(3) provides that dismissal of a bankruptcy case “reverts the
property of the estate in the entity in which such property was vested immediately before the
commencement of the case....” Therefore, upon dismissal of a chapter 13 case, the right to the
funds in the hands of the chapter 13 trustee revert to the debtor. Upon return of the funds to the
debtor, the debtor is free to dispose of these funds as applicable law would otherwise permit.
This in no way relieves the debtor from any obligation for unpaid fees that she may have to her
counsel or of any agreement between the debtor and counsel that the returned funds should be
the source of payment for fees still due. Neither is counsel restricted from pursuing available
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4I am not unmindful of the difficulty debtor’s counsel may sometimes face in collecting unpaid
fees in dismissed chapter 13 cases; however, compelling the chapter 13 trustee, and inviting the Court, to
join the fee collection process under these circumstances is not appropriate.
4
remedies for collection of such fees under applicable non-bankruptcy law in the appropriate non-
bankruptcy forum.4
BY THE COURT:
KEVIN J. CAREY
UNITED STATES BANKRUPTCY JUDGE
Dated: December 15, 2005
Copies to:
Shekima T. Lewis
526 Millbank Road
Upper Darby, PA 19082
Stephanie F. Ritigstein, Esquire
Jenkins & Clayman
412 White Horse Pike
Audubon, NJ 08106
Eric J. Clayman, Esquire
Jenkins & Clayman
412 White Horse Pike
Audubon, NJ 08106
Michael Seth Schwartz, Esquire
Robert C. Keller & Associates
7600 West Chester Pike
2nd Floor West
Upper Darby, PA 19082
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5
William C. Miller, Esquire
(Chapter 13 Trustee )
111 S. Independence Mall
Suite 583
Philadelphia, PA 19106
Timothy B. McGrath, Clerk, U. S. Bankruptcy Court
Pamela Blalock, Courtroom Deputy Clerk
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