A bankruptcy court in Massachusetts has held that an attorney who accepted $10,000 in legal fees must turn it over to a Chapter 7 bankruptcy trustee. The judge in the case found that the money was earned prior to the bankruptcy being filed by the attorney, which means it was part of the bankruptcy estate. The attorney billed his client $291, $8,924, and $2,070 at various times after asking for Chapter 7 protection from creditors.
This ruling was in response to a motion filed by the trustee overseeing the man's assets. He did try to argue that the money was earned after the case was filed, which would not make the money part of the bankruptcy estate. In a Chapter 7 case, non-exempt assets are liquidated with the proceeds used to pay off creditors.
Although he billed his client after petitioning for bankruptcy protection, the court found that the money was for services rendered before the petition. The court further ruled that there was no evidence that there was any discussion of the client retaining the attorney's services after the petition was filed. Furthermore, the man only continued to help his client at the urging of the court and his client at the time.
Those who are looking to get a fresh financial start may be able to do so when they file for Chapter 7 bankruptcy. Assets that are not exempt by state or federal law may may be liquidated to pay creditors. In some cases, a debtor may owe little or nothing to creditors depending on what type of assets he or she may have. In addition, filing for bankruptcy may entitle a debtor to an automatic stay of creditor debt collection efforts.