In In re Cummings, the chapter 12 debtors, who successfully confirmed their chapter 12 plan of reorganization, objected to their attorneys’ application for compensation and reimbursement of expenses. The bankruptcy court found that the nature of the services, the time spent and the rates charged by counsel were all reasonable in light of the circumstances of the case. Accordingly, the court granted the application for compensation.

The debtors proposed several plans that were vigorously disputed by major creditors and that required several court hearings. After a plan was confirmed, counsel filed an application seeking approval, and payment through the plan, of a total of $21,429. The amount consisted of $24,532.50 in fees and $1,482.22 in expenses, minus a courtesy discount of $4,585.72. 

An April ruling by Hon. Mary Jo Heston of the U.S. Bankruptcy Court for the Western District of Washington in Tacoma addressed a fairly complicated and nuanced administrative expense request, ultimately adopting the view — contrary to at least two circuits — that substantial contribution claims are allowable in chapter 7 bankruptcy cases. In re Maust Transport Inc., Ch. 7 Case No. 14-40595 [Docket No. 167] (Bankr. W.D. Wash. April 3, 2018).

The Background

While not disputed among the parties, the factual posture of Maust was somewhat complicated. J.D. Logistics, Inc. (administrative claimant) was one of several creditors that commenced an involuntary case against the debtor under chapter 7 of the Bankruptcy Code. At the time, the debtor was subject to a state court receivership proceeding, the alleged purpose of which was to pay the debtor’s secured creditor Columbia State Bank (secured lender). 

Hon. Jeff Bohm of the U.S. Bankruptcy Court for the Southern District of Texas recently issued an opinion holding that an undersecured creditor is entitled to post-petition attorneys’ fees as part of its secured claim where (1) the creditor holds a bifurcated claim based on pre-petition agreements that allow the creditor to recover its reasonable attorneys’ fees, and (2) the creditor has made the § 1111(b)(2) election.

Background

In October 2016, debtor Pioneer Carriers LLC executed a note in favor of Equify Financial, LLC in the principal amount of $389,268.93 (the “note”) secured by a security agreement on the debtor’s non-real property assets. The note and security agreement provided that the debtor would pay Equify’s attorneys’ fees incurred upon default and enforcement of the note.