Complete the following test questions and hit "Submit" at the end. The results of the test will be emailed to you within 24 hours.
NOTE: Some of the questions (but not all!) will prompt you if you select an incorrect answer.
1. INCORRECT. The correct answer is "True."
Court appointment is only required when the attorney represents the "estate" (as in, for example, any Chapter 11 case), or representing the trustee to pursue property of the estate, such as, in a Chapter 7, where the debtor is a plaintiff in a lawsuit for damages; the legal interest in the lawsuit is property of the estate and the attorney would need to be appointed to continue representing the client.
See In re Saturley 131 B.R. 509 (Bankr.Me. 1991)
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2. INCORRECT. Any portion of a pre-petition retainer fee, not used up for pre-petition services provided as of the date the petition is filed, is property of the debtor's bankruptcy estate, and the trustee may demand that it be paid over. The weight of authority is that the debtor's attorney in chapter 7 cannot be paid out of the estate.
A minority of cases have created an exception: if the retainer fee is a "fixed" fee agreement, meaning that if the debtor and attorney agree that all pre- and post-petition services will be paid by the retainer fee and no additional billable time will be charged, then the unused balance will not be deemed property of the estate. Check with your local jurisdiction about the "fixed fee" exception.
See Chapter 7 Trustee's Handbook (ed. July 1 2002) ¶ 6(D) Duties of Trustee
3. INCORRECT. Same as question no 2: Any unused portion of the fee still on the books as of the petition filing date is ordinarily deemed property of the estate, and the trustee will probably demand that it be turned over.
If the retainer agreement is a "fixed fee" agreement, some cases have held this to be OK and allow the attorney to keep the balance to pay post-petition services.
6. INCORRECT. Any unpaid balance of the fee owed as of the date the petition is filed is discharged in the bankruptcy. Any attempt to charge the client, postpetition, for unpaid pre-petition services, is a violation of the automatic stay and, following discharge, a violation of the final discharge.
EXAMPLE: See IN RE CASTILLO N. CAL. 2011 where the court ordered full disgorgement of all fees collected where debtor's attorney demanded payment for unpaid prepetition balance.
See also In re Mansfield ___ B.R. ___ (Bankr.E.D.Pa. 2008)
7A. CAVEAT: Yes, you may estimate time, but your estimates must be down to a two-or-three minute margin. You don't have to run a time-clock, but do not give wild, inflated, or "boilerplate" estimates.
7B. WRONG! This is a common error. Do not wait until the court or trustee demands to see your time records to "reconstruct" them by flipping through the file and guestimating how much time you must have taken for each task. The court will most certainly order disgorgement or disallow the fees unless the time-entries are created "contemporaneously," that is, at or near the time the task was actually done.
8. WRONG. A bonus may be paid based on the overall volume of revenue for the firm, but most courts will consider paying a bonus for a particular case to anyone, whether employed or not, as a form of prohibited fee-splitting.
See for example In re Bass et al.
10A. Okay. See 11 U.S.C. § 504(b)(1).
10B. Obviously incorrect.
De-select this answer.
10C. Wrong. Paying anybody a "bonus" for a particular case will probably be deemed fee-splitting.
10D. Okay. But it is sometimes unclear what the definition of a "member" of the firm is. See 11 U.S.C. § 504(b)(1).
10E. CLEARLY INCORRECT.
10F. Okay. But like the term "member," the cases are muddled as to what exactly is the definition of an "associate" of the firm. See 11 U.S.C. § 504(b)(1).
A case allowing compensation paid to some "temp" attorneys who worked on a case as regular associates, is In re Worldwide Direct, W.D.N.Y. 2007.
A case recent case holding the attorney who helped out on a case was not a "regular associate" is In re Ferguson, N.D. Tex. 2011.
10G. UNCERTAIN. The common practice of an attorney whose office is remote from the location for the 341 meetings paying an attorney to stand in for him/her at the 341 calendar, is deemed fee-sharing of in some jurisdictions.
Check you local jurisdiction.
You will not be marked wrong if you select this answer.
10H. UNCERTAIN. The increasingly common practice of hiring "temp" attorneys and paralegals from outside agencies to help with difficult cases or case-load has not been dealt with by more than a handful of cases to date. At least one case has ruled that such practice is permissible.
Check your local jurisdiction.
14. INCORRECT. If you have not received the actual funds prepetition for prepetition services at the time the petition is filed, the fee debt is discharged; simply holding a post-dated check is not actually being paid, the check is simply a promise to pay; the discharge nullifies such promises.
And, any check you're holding that draws against funds that were in the bank account when the petition is filed is property of the estate; debtor's attorneys in chapter 7 may not be paid out of estate funds.
To be safe, until you file the petition, it is prudent to insist payment in the form of cash, debit card, or cashiers check.
16. WRONG. See explanation for question no. 1.