Can You Discharge Attorneys’ Fees In A Bankruptcy?
If you have been in a lawsuit, you may have unpaid attorneys’ fees. Those fees may be your own—money you owed to your own attorney—or, they could be fees for the other side, that you were ordered to pay by the court. This often happens in family law cases, in contract litigation, or in some statutory claims, which allow the award of attorneys’ fees to the winning side.
Are Fees Dischargeable?
For the most part, attorneys’ fees are dischargeable like any other debt. However, to some extent attorneys’ fees are treated differently depending on what kind of case they came from.
Your first thought may be the attorneys’ fees that you incur in the course of your bankruptcy. Attorneys’ fees that you owe in a bankruptcy are dischargeable—however, most attorneys, knowing this, will require payment of all or part of the fee up front.
In Chapter 13 bankruptcy, the fees tend to be a little higher—but the good news is that in some cases, you may be able to include the attorneys’ fees in the plan. That largely depends on your attorney, your case, and your individual situation.
In many cases, attorneys’ fees are awarded in a divorce, or as part of a divorce proceeding. This gets complex, because attorneys’ fees that are incurred or assessed for pursuing child support or alimony are not dischargeable, as child support and alimony aren’t dischargeable.
If there are some or all of an attorneys’ fees award that only relate to the property division part of the divorce case, those fees are dischargeable, although in reality, it’s often hard to parse out what part of fees were incurred for what reason through the course of a divorce case.
Fees and Nondischargeable Debt
The same logic in family law cases, applies to attorneys’ fees incurred in other cases: If the attorneys’ fees were assessed pursuing or in any case involving non-dischargeable debt, the fees won’t be dischargeable. So, for example, if you have a judgment against you for fraud or a criminal action, the attorneys’ fees assessed against you won’t be dischargeable.
In some cases, attorneys’ fees may be secured by a lien, the way a home or car are secured by a bank lien. A retainer agreement may provide that an attorney has a lien on certain property. Like any creditor, the retainer agreement must properly secure the property, according to the requirements of the Uniform Commercial Code. Many retainer agreements do not contain the required language.
If they do, then the fees are treated the same way as any secured creditor. In some cases, there may be a way to handle the lien, challenge it, or lower the amount of the lien to the value of the property it secures.