Remember the medieval maps that warned “there be dragons”? In the bankruptcy world, those dragons are post dated checks from your debtor client. Stay away.
Post dated checks in payment of the debtor’s attorneys fees create a prepetition claim, subject to the automatic stay and the bankruptcy discharge, held the court inWalton v. Clark & Washington (Bnkr. MD FL 2011). The opinion rejects the claim that the checks and the fee agreement created an executory contract and went on to hold that the post dated checks created an impermissible conflict between the debtor and the attorney.
This decision falls in behind the 9th Circuit decision in Biggar that the debt for the unpaid balance of bankruptcy attorneys fees was not an unwritten exception to discharge; exceptions were confined to those enumerated in §523.
The lesson, however difficult, is clear. You cannot collect on a prepetition fee agreement post petition.
The economics of this practice are undoubtedly hard. But, as I told my kids when they whined that something was hard, “you can do hard things.”
Image courtesy of Les Haines.
From everything I can tell from their advertising, it appears that Clark & Washington is still accepting post-dated checks. How is this possible?
On the subject, how do you structure your fee arrangements with your Chapter 7 clients? Do you really charge all fees upfront in this competetive environment?
Wasn’t there a song that warned about tugging on Superman’s cape? If the other side wears a black robe and has the power of contempt, I’d suggest that continuing to do what you’ve been told not too doesn’t show good judgment.
There is no ethical and effective alternative to getting your money upfront in a Chapter 7. If the client doesn’t have it and can’t raise it from family or friends, then we discuss a Chapter 13 which allows payment of the fees over time.
My basic position on competition is, and has been for a decade or more, that I don’t compete on price, I compete on quality. I lose some prospects, but not often.
Well, you were right. Clark and Washington got hit with a Class Action. The next step is going to be having to need a Guarantor on the retainer.