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Debtor in Chapter 13 dismissal must pay lawyer fees

If Florida debtors file for Chapter 13 bankruptcy, their case is dismissed without confirmation, and the lawyer fees are returned to the debtor by mistake, the lawyer may be able to recover those fees. This was the April 14 ruling by the U.S. Bankruptcy Appellate Panel for the 1st Circuit. In doing so, the BAP concluded that a 2015 U.S. Supreme Court ruling that said plan payments for a Chapter 13 bankruptcy held by a trustee must be returned to the debtor if the case was converted to a Chapter 7 does not apply in this case.

According to the BAP, the difference was that the newer case was dismissed before confirmation. The question has split courts, and while most have concluded that the ruling in the previous case, Harris v. Viegelahn, does not apply when the dismissal occurs before confirmation, not all have agreed.

This was a complex case in which the debtor filed for Chapter 13 bankruptcy and then filed two amended plans that were not confirmed. When the entire case was ultimately dismissed, the trustee made an error in payments to the lawyer. They were then unsuccessful in getting the money back from the debtor.

One misconception some people may have about bankruptcy is that those who file lose all of their assets. This is not necessarily the case. People generally file for Chapter 13 bankruptcy when they hope to keep some of their assets, such as a home, and create a repayment plan. However, filing for bankruptcy can be complex, and errors can delay the case or lead to its dismissal. People who are considering filing for bankruptcy may want to discuss the situation with a lawyer who can explain the difference in Chapter 13 and Chapter 7 bankruptcy and explore which option might suit a debtor better.

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