December 03, 2014 Articles

Are Estate Professionals Entitled to Be Compensated for Defending Their Own Fees?

Unlike most non-bankruptcy representations, simply pleasing the client is not enough to get the bill paid.

By Catherine Steege

When it comes to getting paid “[b]ankruptcy professionals operate in an environment that is virtually unheard of in the legal profession as a whole.” Comm. on the Judiciary, Hearing on Professional Fees in Bankruptcy (Mar. 24, 1992). Unlike most non-bankruptcy representations, simply pleasing the client is not enough to get the bill paid. Instead, counsel for a bankruptcy estate must subject his or her bill to close scrutiny not only by the bankruptcy court but also by every other party-in-interest in the case. That means that those in active litigation with the bankruptcy estate typically enjoy the right to object to the fees incurred by their opponent. Not surprisingly, many litigants take advantage of that opportunity, using the bankruptcy compensation process as another tool in their defense strategy, often at some considerable expense to the petitioning attorney. And when counsel seeks compensation for defending his or her fees, that request is often met with objections from the United States Trustee or others in the case. The net effect can be a significant bankruptcy tax on counsel’s bill, particularly in smaller cases where the fees incurred for defending fees can be a significant percentage of the overall bill.

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