Tagged Opinion

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF FLORIDA

IN RE: 

Cheryl Brown, 

aka Cheryl Marie Brown, 

aka Cheryl Marie Brown−Grant,

 Debtor.

____________________________________/

CASE NO. 20-23632-BKC-LMI

Chapter 7

IN RE: 

Charmeen L Mcfarland, 

 Debtor.

___________________________________/

CASE NO. 20-23354-BKC-LMI

Chapter 7 

IN RE: 

Lavonia Valerie McCoy, 

aka Lavonia Leggett McCoy,

aka Lavonia McCoy,

aka Lavonia Valerie Jackson McCoy,

CASE NO. 20-18268-BKC-LMI

Chapter 7 

Laurel M. Isicoff

Chief United States Bankruptcy Judge

___________________________________________________________________________

ORDERED in the Southern District of Florida on June 16, 2021.

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aka Lavonia V. Leggett McCoy,

aka Lavonia V. McCoy, 

 Debtor.

___________________________________/

MEMORANDUM OPINION AND ORDER SETTING FORTH STANDARDS 

ON CHAPTER 7 BIFURCATED FEES 

AND DENYING REQUEST FOR INJUNCTIVE RELIEF

More and more the public is bombarded with advertising for “low money 

down” or “no money down” bankruptcies. The “legal” framework of these offers 

is the bifurcation of fees in chapter 7 bankruptcy cases. Are these arrangements 

a partial answer to the systemic challenge to access to justice? Are these 

arrangements a violation of the Bankruptcy Code? Are these arrangements a 

violation of the Rules Regulating the Florida Bar?

In Lamie v. U.S. Trustee, 540 U.S. 526, 538 (2004), the United States 

Supreme Court ruled that 11 U.S.C. §330(a)(1) “does not authorize compensation 

awards to debtors’ attorneys from estate funds.” Several circuits, both before and 

after Lamie, have held that the unpaid balance of prepetition fees are 

dischargeable in bankruptcy. See Rittenhouse v. Eisen, 404 F.3d 395 (6th Cir. 

2005); In re Fickling, 361 F.3d 172 (2d Cir. 2004); Bethea v. Adams & Assoc., 352 

F.3d 1125 (7th Cir. 2003); In re Biggar, 110 F.3d 685 (9th Cir. 1997). Thus, a 

chapter 7 lawyer must be paid by the debtor, but the chapter 7 lawyer cannot 

look to the estate or to the debtor postpetition for payment of fees for services 

rendered or to be rendered if the obligation to pay the fee arises prepetition. 

In the Final Report of the ABI Commission on Consumer Bankruptcy (the 

“ABI Commission Report”), the American Bankruptcy Institute’s Commission on 

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Consumer Bankruptcy (the “ABI Commission”) wrote “the dischargeability of prepetition attorney’s fees in chapter 7 hinders access to the bankruptcy system 

and access to justice.” Final Report of the ABI Commission on Consumer 

Bankruptcy, §3.01 Chapter 7 Attorney’s Fees at 89 (American Bankruptcy 

Institute, 2017-2019). 

As the ABI Commission noted in the comments to section 3.01, currently 

there are four payment options available to potential chapter 7 debtors who wish 

to retain counsel, each with its own set of problems and challenges: (1) delay 

filing the case until all the fees are paid up front; (2) the lawyer can file the 

chapter 7 case without getting paid in full up front and hope that the debtor will 

voluntarily pay additional fees postpetition; (3) the attorney can bifurcate the 

legal services; or (4) the debtor can file a chapter 13 case instead so that the fees 

may be paid postpetition.

As the court wrote in In re Hazlett, 2019 WL 1567751 (Bankr. D. Utah 

2019), without access to counsel, a consumer chapter 7 debtor must either file 

a case with no help or, perhaps even worse, file with the assistance of a 

bankruptcy petition preparer, many of whom charge more than lawyers, and who 

are prohibited from providing any legal assistance.

The access to justice issues are troubling and compelling. However, the 

Court must rule within the framework of the law. As Judge Easterbrook observed 

in Bethea, 352 F.3d at 1127-28, the courts cannot rule based on what is good 

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public policy. “[T]he judiciary’s job is to enforce the law Congress enacted, not 

write a different one that judges think superior.” Id.0F

1

Practitioners have tried to develop ways, consistent with the legal 

restrictions just described, to provide a debtor who cannot pay all or part of the 

attorney fees up front, an option that would allow a small, or no, payment up 

front, with the opportunity to pay additional fees over time after the case is filed. 

Whether and to what extent these arrangements are allowable has been the 

subject of cases around the country. 

These three cases present this Court with the opportunity to provide a 

framework for when and under what circumstances bifurcation of chapter 7 fees 

is allowable. As the Court made clear at the initial hearing on these matters, 

although these cases are assigned to the Chief Judge, the legal conclusions in 

this opinion represent the legal conclusions of all of the judges of the Bankruptcy 

Court of the Southern District of Florida.

FACTUAL BACKGROUND

This matter came before the Court upon three motions filed by the United 

States Trustee (the “UST”) objecting to the business practices of the Semrad Law 

Firm, LLC (the “Semrad Law Firm”) and Van Horn Law Group, P.A. (the “Van 

Horn Law Firm”) (collectively the “Law Firms”) with respect to the bifurcation of 

attorney fees in consumer chapter 7 cases. United States Trustee’s Motion for 

Examination of Fees of Chad T. Van Horn and Van Horn Law Group Under 11 

1 The Court joins many others in the bankruptcy community, urging Congress to address this 

issue through legislation. 

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U.S.C. Section 329(b); Federal Rules of Bankruptcy Procedure Rule 2016 and 

2017; and for an Injunction Against Prohibited Conduct (ECF #37, Case No. 20-

18268-BKC-LMI (the “McCoy Case”)) (the “McCoy Motion”) addresses concerns 

raised by the practices of the Van Horn Law Firm. United States Trustee’s 

Amended Motion for Examination of Fees of Haidan Huang and the Semrad Law 

Firm a/k/a Debtstoppers Under 11 U.S.C. Section 329(b); Federal Rules of 

Bankruptcy Procedure Rule 2016 and 2017; and for an Injunction Against 

Prohibited Conduct (ECF #20, Case No. 20-23632-BKC-LMI (the "Brown Case”))

(the “Brown Motion”) and United States Trustee’s Amended Motion for 

Examination of Fees of Yevgeniy Feldman and The Semrad Law Firm a/k/a 

Debtstoppers Under 11 U.S.C. Section 329(b); Federal Rules of Bankruptcy 

Procedure Rule 2016 and 2017; and For An Injunction Against Prohibited Conduct

(ECF #17, Case No. 20-23354-BKC-LMI (the “Mcfarland Case”)) (the “Mcfarland 

Motion”) address concerns raised by the practices of the Semrad Law Firm. The 

McCoy Motion, the Brown Motion and the Mcfarland Motion shall be referred to 

collectively as the “Motions”. The Court held a hearing on the McCoy Motion and 

Mcfarland Motion on February 22, 2021 at 1:30 p.m. and on the Brown Motion 

on March 3, 2021 at 9:30 a.m. (collectively the “Hearings”), where the Court

considered the Motions, the responses1F

2, and arguments of counsel.

2 See Response to United States Trustee’s Amended Motion for Examination of Fees (ECF #22, 

Case No. 20-23354); Response to United States Trustee’s Amended Motion for Examination of Fees 

(ECF #26, Case No. 20-23632); Response to The United States Trustee’s Motion for Examination

of Fees of Chad T. Van Horn and Van Horn Law Group Under 11 U.S.C. Section 329(b); Federal 

Rules of Bankruptcy Procedure Rule 2016 and 2017; and for an Injunction Against Prohibited 

Conduct (DE 37) (ECF #43, Case No. 20-18268).

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The McCoy Case

Lavonia Valerie McCoy (“Ms. McCoy”) filed her chapter 7 bankruptcy case 

on July 30, 2020 (the “McCoy Petition Date”). On June 30, 2020, Ms. McCoy 

executed a Contract for Prepetition Legal Services in a Chapter 7 Bankruptcy 

Case (the “McCoy Prepetition Agreement”)2F

3 and on July 30, 2020, Ms. McCoy 

executed a Contract for Postpetition Legal Services in a Chapter 7 Bankruptcy 

Case (the “McCoy Postpetition Agreement”).3F

4 The Disclosure of Compensation of 

Attorney for Debtor (ECF #5) (the “Form 2030 Fee Disclosure”), required to be 

filed by all attorneys representing debtors, states that the Van Horn Law Firm 

agreed to accept $2,235.00 for the described legal services, and that Ms. McCoy 

made a payment $335.00 prior to the McCoy Petition Date, leaving a “balance 

due” in the amount of $1,900.00. In the Form 2030 Fee Disclosure, in addition 

to the pre-printed legal services described in the form, the Van Horn Law Firm 

added the following: 

Includes, $335 filing fee, $15 for Pre-Consumer Credit Counseling 

fees, $10 Post Credit Counseling Fee Courses, $75 Credit Report 

retrieval fee, and other estimated expenses of $150 as prescribed by 

the guidelines for compensation for professional services or 

reimbursement of expenses by Attorneys. Representation of the 

Debtor in Negotiation with the Trustee; Motions to Reopen Case; 

Review & Attendance, if necessary, to Motions for Relief from Stay; 

Review of Redemption Agreements; Post-Discharge review of 

Debtor's credit report. Preparation and prosecution of Motions to 

Reschedule 341 Meeting of Creditors; Attendance at Continued 341 

Meeting of Creditors; Amendments to Statements or Schedules; 

Preparation of demand letters to garnishing creditors; Preparation 

3 The McCoy Prepetition Agreement is attached as Exhibit A to the McCoy Motion. 4 The McCoy Postpetition Agreement is attached as Exhibit B to the McCoy Motion.

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and defense of an Objection to a Motion for Relief from Stay. Review 

of Student Loans.

The McCoy Prepetition Agreement provides:

Before the bankruptcy case is filed I understand that the fee of 

$335.00 is to be paid pursuant to the terms of this Contract as a 

flat fee . . . in exchange for a commitment by VHLG to provide the 

legal services described above . . . . After the bankruptcy case is 

filed, I understand that I will be presented with a second retainer 

agreement to pay VHLG $1,900 for attorney' s fees, which include 

any pre and post-petition costs to represent my interests, including: 

preparation and amendment, of schedules; preparation and 

attendance of the Section 341 Meeting of Creditors; review and 

attendance, to motions for stay relief; review of any redemption 

agreements; review of any reaffirmation agreements; case 

administration and monitoring; if necessary; as well as a postdischarge review of my credit report to ensure accurate reporting.

The McCoy Prepetition Agreement also provides:

For the fee established in this agreement and the post-petition 

retainer, we agree to provide to you basic legal services in connection 

with your case. Basic services include, but are not limited to, advice 

to You before and during the case concerning the nature and effect 

of Chapter 7 bankruptcy; preparation and filing of statements and 

schedules; We will attend Your meeting of creditors; prepare any 

valid, supportable defense in the event of a motion to dismiss or 

motion for relief from stay; and We will prepare any request by You 

to add creditors, incur credit or suspend payments. Other basic 

services such as negotiating with creditors during the life of the plan, 

submitting requests for payment reports from the Trustee, and other 

regular and routine services not specifically stated are included 

without additional charge to you.

The McCoy Postpetition Agreement provides:

As to the dischargeability of pre-filing fees, VHLG acknowledges that 

if any fees were owed prior to filing the bankruptcy, they are hereby 

uncollectable and will be discharged. 

In consideration of VHLG's post filing services, I agree to pay and 

VHLG agrees to accept $1,900 in attorney's fees'. The scopes [sic] of 

the services are outlined below. I further understand and agree that 

additional professional legal services will result in additional fees 

that are due. I understand that the fee is to be paid pursuant to the 

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terms of this Contract as a flat fee, and this fee shall immediately 

become property of VHLG in exchange for a commitment by VHLG 

to provide the legal services described above. Said funds will be 

deposited into the main bank account owned by VHLG and will be 

used for general expenses.

In the event you fail to timely pay the Post-Filing Fixed Fee, VHLG 

may file a motion with the Bankruptcy Court requesting permission 

to withdraw as your counsel. You have the right to terminate this 

Fee Agreement at any time, and in such event, VHLG is not obligated 

to return any portion of the fee paid.

I further understand that I have a fourteen (14) day right of' 

rescission of this agreement. In the case of rescission, I will notify 

VHLG within fourteen (14) days of executing this agreement and 

VHLG will no longer have any liability for representing me and I will 

not be liable for any fees herein.

The McCoy Postpetition Agreement identifies a detailed list of services to be 

provided postpetition.4F

5 

5 POST-FILING SERVICES/POST-FILING FEES

Preparation and filing the remainder of your required post filing bankruptcy documents, 

including (if necessary):

1. Statement of Financial Affairs (Official Form 7);

2. Schedules A through J and Perjury Statement of Schedules signed by debtors (Official 

Forms 6A-6J);

3. Summary of Schedules (Official Form 6 Summary);

4. Statistical Summary of Certain Liabilities (Official Form 6 Summary);

5. Disclosure of Compensation of Attorney for Debtor (Official Form B203);

6. Statement of Current Monthly Income and Means Test Calculation (Official Form 22 

A);

7. Chapter 7 Individual Statement of Intention (Official Form 8);

8. Certification of Completion of Instructional course concerning personal financial 

management (Official Form 23) and certificate of course provider;

9. Providing the necessary documentation including tax returns and pay advices to the 

Trustee in advance of Your Meeting of Creditors;

10. Review and attendance, if necessary, to motions for stay relief; review of any 

redemption agreements;

11. Preparation and attendance of the Section 341 Meeting of Creditors;

12. Telephone conferences with You, the Trustee, Trustee’s counsel, creditors and any 

other interested parties relating to the case; legal research and preparation of 

correspondence necessary to represent You in post filing matters;

13. Providing You the necessary information to enable You to complete the required post 

filing financial management class;

14. Preparation and amendment, if necessary, of schedules;

15. Review of any reaffirmation agreements;

16. Case administration and monitoring;

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Ms. McCoy received her discharge on November 18, 2020 (ECF #35, Case No. 

20-18268-BKC-LMI).

The Mcfarland Case

Charmeen Mcfarland (“Ms. Mcfarland”) filed a chapter 7 bankruptcy case 

on December 7, 2020 (the “Mcfarland Petition Date”). Ms. Mcfarland signed an 

engagement agreement with the Semrad Law Firm on December 4, 2020 (the 

“Mcfarland Prepetition Agreement”)5F

6, but did not pay the Semrad Law Firm any 

money prepetition. On January 13, 2021, after the 341 Meeting of Creditors6F

7,

Ms. Mcfarland signed a second agreement for the postpetition services (the 

“Mcfarland Postpetition Agreement”).7F

8

The Mcfarland Prepetition Agreement identifies certain services that will 

be provided prepetition and the fee associated with those services.8F

9 The 

17. Motion to reopen, if necessary;

18. Attendance of 2004 Examination with Trustee;

19. Compliance with random US Trustee Audit;

20. A post discharge review of my credit report to endure accurate reporting;

21. Review of student loans;

22. Preparation and prosecution of a Motion Appear Telephonically at the 341 Meeting;

23. Preparation and prosecution of a Motion to Reschedule 341 Meeting;

24. Attendance at a continued 341 Meeting;

25. Preparation of amendments to Statement or Schedules;

26. Preparation of demand letter to a garnishing creditor;

27. Preparation and defense of an Objection to a Motion for Relief from Stay....

6 A copy of the Mcfarland Prepetition Agreement is attached as Exhibit A to the Mcfarland Motion.

7 At oral argument, the Semrad Law Firm stated this delay was a mistake; normally the debtor 

signs a postpetition agreement as soon as the petition has been filed.

8 A copy of the Mcfarland Postpetition Agreement is attached as Exhibit B to the Mcfarland 

Motion.

9 a. Before the case is filed, the Firm agrees to: 

i. Personally counsel you regarding the advisability of filing either a Chapter 13 or a 

Chapter 7 case, discuss both procedures as well as nonbankruptcy options, and answer 

your questions; 

ii. Personally explain to you that the Firm is being engaged to represent you on all matters 

arising in the case, as required by Local Bankruptcy Rule, and explain how and when the 

attorney’s fees are determined and paid; 

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Mcfarland Prepetition Agreement also identifies certain services that will be 

provided postpetition and the fee associated with those services.9F

10

iii. Personally review with you and sign the completed petition, statements, and 

schedules; 

iv. Timely prepare and file your petition, statements, and schedules, 

v. Advise you on which creditors you will need to continue to pay, such as housing or 

vehicle payments that you intend to retain. 

b. The fee for services provide [sic] before the case is filed is $0 

c. The Firm may also incur costs for such items as credit reports and tax transcripts for which 

it will not seek reimbursement.

10 a. After the case is filed, the Firm agrees to: 

i. Advise you of the requirement to attend the meeting of creditors and notify you of the 

date, time, and place of the meeting; 

ii. Advise you of the requirement to attend a debtor education course and provide a 

certificate of completion to the Firm; 

iii. Send notice of your case filing to creditors; 

iv. Correspond with creditors regarding any matters necessary for the administration of 

your case, including to cease payroll garnishments, unfreeze bank accounts, or recover 

property that was improperly seized by a creditor; 

v. Timely submit to the Chapter 7 trustee properly documented proof of income, tax 

records as well as any other necessary documentation; 

vi. Provide you with knowledgeable legal representation at the meeting of creditors as 

well as any continued or rescheduled meetings in time for check-in and examination; 

vii. Timely prepare and file the notice of completion of the debtor education course; 

viii. If the Firm will be employing another attorney to attend the meeting of creditors, 

personally explain to you, in advance, the role and identity of the other attorneys and 

provide that attorney with your file in sufficient time to review it and properly represent 

you at the meeting; 

ix. Timely negotiate with the Trustee regarding any property or actions that the Trustee 

may pursue that could be adverse to your interests; 

x. Timely prepare, file, and serve any necessary statements, amended statements, 

amended schedules and any change of address, in accordance with information provided 

by you; 

xi. Monitor all incoming case information, including but not limited to, Reaffirmation 

agreements, notice of audits by the US Trustee, correspondence from you or any 

interested parties; 

xii. Review and negotiate, if necessary, any reaffirmation agreements and personally 

explain the terms of said agreements to you; 

xiii. Be available to respond to your questions throughout the term of the case; 

xiv. Review and timely respond, if necessary, to Trustee motions to dismiss the case; 

xv. Review and timely respond, if necessary, to motions for relief from stay; 

xvi. Prepare, file, and serve all appropriate motions to avoid liens; 

xvii. Prepare, file, and serve all appropriate motion [sic] to redeem; 

xviii. Send In Re Mendiola letters to previously undisclosed creditors; and 

xix. Provide any other legal services necessary for the administration of the case.

b. The fee for services provide [sic] after the case is filed is $1,262 

c. The firm will have no right to payment of the fee listed in section 4(b) unless you sign an 

agreement after the filing of your bankruptcy case to pay the Firm for services rendered after the 

filing of your case. 

d. After the case is filed, the Bankruptcy Court will require payment of filing fees in the amount 

of $335.00. In order to pay this, you have two (2) options (please circle one): 

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The Mcfarland Postpetition Agreement includes the same nineteen services for 

“postpetition fees” previously listed in the Mcfarland Prepetition Agreement and 

adds the following:

xx. Provide post discharge services such as a review of Client(s)’ 

credit report and advising Client(s) regarding possible discharge 

violations that may have occurred. 

b. The fee for services provided after the case is filed is $1,600.

The Mcfarland Postpetition Agreement provides that the fees owed postpetition

are to be paid by the Debtor in monthly installments. 

The Form 2030 Fee Disclosure (ECF #4) disclosed that the Semrad Law

Firm had agreed to accept $1,262.0010F

11 for legal services and that Ms. Mcfarland 

had made a payment of $0 prior to the Mcfarland Petition Date, leaving a balance 

due in the full amount of $1,262.00. Nowhere on the Form 2030 Fee Disclosure 

is there any indication that the fee will be paid monthly. Nor does the Form 2030 

Fee Disclosure modify the undertakings identified in the pre-printed form.11F

12

The Brown Case

The Brown Case is substantially similar to the Mcfarland Case. Cheryl 

Brown (“Ms. Brown”) filed her chapter 7 bankruptcy case on December 15, 2020 

(the “Brown Petition Date”). The Form 2030 Fee Disclosure (ECF #4) stated that 

the Semrad Law Firm agreed to accept $1,362.00 for legal services, and that Ms. 

i. Pay the costs directly to the bankruptcy court either all at once, or apply to pay these 

costs in installments; or 

ii. Request that the Firm pay the costs on your behalf for which it will seek reimbursement 

from you.... 11 The increase from $1,262.00 to $1,600.00 represents Ms. Mcfarland’s obligation to repay the 

Semrad Law Firm the filing fee.

12 See infra note 18.

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Brown made a payment of $0 prior to the Brown Petition Date, leaving a “balance 

due” in the full amount of $1,362.00. On December 14, 2020, Ms. Brown 

executed an engagement agreement12F

13 with the Semrad Law Firm virtually 

identical to the one that had been signed by Ms. Mcfarland (the “Brown 

Prepetition Agreement”).13F

14 On December 15, 2020, immediately after her 

bankruptcy petition was filed, Ms. Brown signed a second agreement for the 

postpetition services (the “Brown Postpetition Agreement”), which was virtually 

identical to the Mcfarland Postpetition Agreement.14F

15 Ms. Brown agreed to pay

$1,700.0015F

16 in monthly installments. 

ANALYSIS

The UST has objected to the following business practices: “(1) the 

marketing of no or little money down Chapter 7 bankruptcy cases; (2) the 

bifurcation of bankruptcy services into pre-petition and post-petition

components; (3) the performance of ‘limited’ pre-petition services for, 

purportedly, little or no charge; and (4) the post-petition collection of fees for 

purported postpetition services in an amount disproportionate to the services 

provided” in an “attempt to increase [their] client base and collect attorney fees 

for bankruptcy services through post-petition payments.” (See McCoy Motion at 

13 A copy of the engagement agreement is attached as Exhibit A to the Brown Motion. 14 Ms. Brown never “circled” her selection in paragraph “d” of the Brown Prepetition Agreement, 

which addresses the filing fee options. However, according to the UST, Ms. Brown “testif[ied] at 

the continued Meeting of Creditors that the decision to borrow funds from [Semrad] was made 

prior to the [Brown Petition Date] and it was always included in the fee arrangement.” (See Brown 

Motion at ¶15). 

15 A copy of the Brown Postpetition Agreement is attached as Exhibit B to the Brown Motion.

16 This amount includes the $338.00 filing fee. The filing fee increased from $335 to $338 on 

December 1, 2020.

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1; Mcfarland Motion at 1-2; Brown Motion at 1-2). In the Brown Motion, the UST 

also objects to the Semrad Law Firm paying the filing fee for the Debtor, which 

filing fee was later repaid post-petition by the Debtor through monthly payments. 

(See Brown Motion at 2). 

The UST argues that the Law Firms’ fees are not compensable under 11 

U.S.C. §329(b) or Local Rule 2090-1(E), and that the advancing of filing fees 

violates 11 U.S.C. §526 and Rule 4-1.8(e) of the Rules Regulating the Florida 

Bar. The UST also argues that the Law Firms failed to comply with the filing and 

disclosure requirements of Fed. R. Bankr. P. 2016 and that the Debtors’ 

Schedule Js were inaccurate because the postpetition fees were not listed as 

expenses. Most importantly however, the UST asks, as do the practitioners, for 

guidance from this Court on how to view bifurcation agreements in chapter 7 

cases. 

The issues before the Court may be summarized as follows:

• Should bifurcation of fees be allowed at all?

• What is a reasonable prepetition fee versus a postpetition fee?

• What happens if the Debtor doesn’t sign a postpetition fee agreement?

• What disclosures should be made to the debtor about a bifurcated fee 

arrangement?

• What disclosures must be made to the court about the bifurcated fee 

arrangement?

• Can the law firm advance filing fees on behalf of the debtor?

The Concept of Bifurcation

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The phrase “bifurcation of fees” in bankruptcy refers to the practice of 

separating services provided to a client into services provided prepetition and 

postpetition. Some services are provided prepetition for one fee (whether a flat 

fee or based on an hourly charge), which is paid before the bankruptcy petition 

is filed, and then any additional services that are provided postpetition are 

charged for, and paid for, postpetition. 

The UST specifically stated it is NOT, at this time, arguing that fee 

bifurcation in chapter 7 cases should be prohibited. And that makes sense 

because fee bifurcation occurs regularly in chapter 7 cases, as well as in other 

bankruptcy cases. Many law firms charge a flat fee that is paid in advance for 

filing a debtor’s chapter 7 petition, preparing the schedules and statement of 

financial affairs, and attending the 341 meeting. These agreements typically 

exclude any postpetition representation such as attendance at 2004 

examinations, reviewing or defending motions for stay relief, or representation 

with respect to adversary proceedings, absent the debtor paying an additional 

fee for the separate retention.16F

17 While individual retainer agreements vary, for 

the most part the services to be provided in general chapter 7 consumer retainer 

agreements are the same as those listed in paragraph 5 of the Form 2030 Fee 

Disclosure.17F

18 After the bankruptcy case is filed, if the debtor requires additional 

17 Under this Court’s Local Rules, however, any attorney of record for the debtor must assist the 

debtor with reaffirmation, redemption or surrender decisions regardless of whether the debtor 

pays an additional fee. See L.R. 2090-1. 18 In return for the above-disclosed fee, I have agreed to render legal service for all aspects of the 

bankruptcy case, including: 

a. Analysis of the debtor's financial situation, and rendering advice to the debtor in 

determining whether to file a petition in bankruptcy; 

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services, counsel will seek additional fees. If the debtor cannot pay those fees, 

the attorney will usually move to withdraw. 

What should be the allowable framework for the bifurcation of fees for 

basic chapter 7 consumer bankruptcy legal services? Can the “no money down” 

or “low money down” models ever satisfy the requirements of the Bankruptcy 

Code, the Bankruptcy Rules, the Rules Regulating the Florida Bar (the “Florida 

Bar Rules”), or this Court’s Local Rules? In arguing against and in favor of these

models, the UST and the Law Firms have referred to the guidelines set forth by 

Judge Williamson of the Middle District of Florida in Walton v. Clark & 

Washington, P.C., 469 B.R. 383 (Bankr. M.D. Fla. 2012) (“Walton”).

In Walton, Judge Williamson approved a bifurcated fee arrangement that 

met the following conditions:

a. The ‘‘two-contract procedure’’ disclosure currently on pages 4–5 

of the prepetition agreement and page 5 of the postpetition 

agreement must be set forth on a separate cover page.

b. Firm clients must acknowledge that they have received and read 

the ‘‘two contract procedure’’ disclosure.

c. The client must execute the prepetition agreement before the 

bankruptcy case is filed and the postpetition agreement after the 

bankruptcy case is filed.

d. The postpetition agreement shall contain a provision notifying the 

client that (i) the client has the right to cancel the postpetition 

agreement—and all financial obligations arising under that

agreement—at any time within 14 days after signing it; and (ii) the 

client may exercise his or her right to cancel the postpetition 

b. Preparation and filing of any petition, schedules, statements of affairs and plan which 

may be required; 

c. Representation of the debtor at the meeting of creditors and confirmation hearing, and 

any adjourned hearings thereof.

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agreement by notifying [the law firm] in writing (at the address 

designated by the firm) within 14 days after signing the agreement 

of his or her intent to cancel the agreement.

e. [The law firm] shall include language in its initial Rule 2016 

disclosure stating that the firm will continue to represent the debtor 

in the case even where the debtor chooses not to retain the firm for 

postpetition services until the Court enters an order allowing the

firm to withdraw from representation.

469 B.R. at 387-88.

The Reasonableness of Fees

Typically, in the bifurcated fee arrangements that have developed to 

address the chapter 7 fee challenge, only a small amount or nothing is charged 

to the client prepetition.18F

19 In the cases before the Court, meaningful services 

were provided prepetition for little or no charge. Postpetition additional services 

were provided, but at a cost that the UST has argued is excessive and 

unreasonable, especially compared to the low or non-existent prepetition charge.

Thus, the UST questions whether the postpetition fees are reasonable under 

section 329. 

The UST argues that if a lawyer does what a lawyer is supposed to do 

prepetition – meet with the client to determine which chapter of bankruptcy, or 

bankruptcy at all, is in the client’s best interest and complete the debtor’s 

schedules and statement of financial affairs, as well as all other documents 

required to be filed with the petition - there won’t be much to do postpetition

that is not ministerial. Thus, the UST argues, bifurcation is just a disguised way 

19 When used in this portion of the opinion, the phrase “bifurcated fee arrangement” is intended 

to refer to the bifurcated fee arrangement for basic consumer chapter 7 legal services, where no 

money is paid in advance, or only a small amount of money is paid in advance.

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 16 of 41
17

to pay for prepetition services postpetition. Looking at the postpetition fees 

through the lens of section 329, the UST argues that the postpetition fees are 

clearly unreasonable. If, in fact, most of the services were provided postpetition, 

then, the UST argues, the Law Firms failed to competently represent their clients 

prepetition. Additionally, if the Law Firms failed to perform the appropriate 

diligence prepetition, the Law Firms may have violated Fed. R. Bankr. P. 9011

when filing the petitions. 

In each of the cases before the Court, the Law Firms pointed out that all 

appropriate prepetition counseling and interviewing took place and all 

documents were completed prior to filing.19F

20 Debtors’ counsel stated that there 

is nothing requiring them to charge a minimum amount for prepetition services.

The Law Firms both argue that there are many services included in the 

description of postpetition services for which other law firms, using the 

traditional fee structure, charge, such as representing the client at a 2004 

examination, amendments to the bankruptcy schedules, or defending motions 

for stay relief. 

There is no question that using the postpetition agreements to pay for 

prepetition services is not acceptable, since that is merely seeking to do indirectly 

what is prohibited directly. See Hazlett, 2019 WL 1567751, at *9 (“[F]ees for prepetition services should not be directly or surreptitiously slipped into the fee 

20 The cases were unremarkable and each of Ms. Mcfarland, Ms. Brown and Ms. McCoy received 

their bankruptcy discharges.

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 17 of 41
18

charged for postpetition services. If this happens, it could be cause for 

disgorgement under §329 or other sanctions.”)

The UST’s argument falls short because it measures the reasonableness 

of the postpetition fee solely by comparing the charge to the fee for the services 

and charges prepetition. However, that is not the appropriate test. In In re Carr, 

613 B.R. 427 (Bankr. E.D. Ky. 2020), Judge Wise held that the reasonableness 

of the prepetition fees and the postpetition fees must be analyzed on the basis of 

the services provided with respect to each flat fee, not compared to each other. 

“[The Chapter 7 Trustee] assumes, in effect, that the Attorneys must charge 

Debtor a comparable hourly rate for prepetition and postpetition work. This is 

incorrect. The Attorneys essentially agreed to perform prepetition services for one 

flat rate and postpetition services for a second flat rate. No party has argued that 

either flat rate was unreasonable.” In re Carr, 613 B.R. at 439. The Court agrees; 

reasonableness is not gauged by a comparison between the prepetition charges 

and the postpetition charges. 

The UST focuses on the services described in the Fee Agreements20F

21 that 

the Law Firms are to provide prepetition and postpetition. The UST argues that 

the description of services in the prepetition agreements and the postpetition 

agreements seem to be the same in some instances, creating confusion.21F

22 The 

UST also argues that the postpetition agreements should not include services 

21 “Fee Agreements” refers collectively to all of the fee agreements that are the subject of this 

opinion. 

22 In each of the three cases, there is some blurring of, and therefore ambiguity in, the description 

of what services are provided regardless of whether the Debtors agree to sign the postpetition 

agreement. The need for more clarity will be discussed below. 

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 18 of 41
19

that will never be provided to a particular debtor (e.g., defending a motion for 

stay relief if the debtor does not have any secured creditors). The UST also argues 

that, for purposes of determining the reasonableness of the postpetition fees, the 

services that might have been needed (2004 exam, schedule amendments, etc.) 

but were not, in fact, provided, should not be included. In sum, according to the 

UST, reasonableness can only be assessed by looking at the actual work 

performed, and the value of the actual services performed. 

However, “reasonableness” of a flat fee arrangement is assessed differently 

than reasonableness evaluated through an hourly rate. See, e.g., In re Dabney,

417 B.R. 826, 831 (Bankr. N.D. Ga. 2009).

Because a flat fee encompasses all required services and the extent

of required services is not fully predictable at the outset of a case,

the reasonableness of a flat fee cannot necessarily be determined 

based on the amount of services required in the case. Nevertheless, 

the amount of a proposed flat fee must bear some relationship to the

work that will likely be required, which inevitably depends on the 

unique facts and circumstances of the case.

Id. 

The Court holds that it will review the reasonableness of the postpetition 

flat fee charged by each of the Law Firms by taking into account not only the 

work that was done but also the services that might have been required in the 

case for which there would have been no additional charge.22F

23 The Court agrees 

that in determining the reasonableness of the flat fees charged by the Law Firms 

23 The reasonableness of any postpetition fees charged at an hourly rate for postpetition services 

will continue to be assessed under the traditional standards for determining the reasonableness 

of hourly fees not subject of 11 U.S.C. §330. See Johnson v. Ga. Highway Exp., Inc., 488 F.2d 

714 (5th Cir. 1974).

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 19 of 41
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the Court should not consider services that would not possibly arise in the case,

such as dealing with student loan issues when the debtor does not have student 

loans.23F

24

The Obligation of Competency and the Issue of Unbundling

In addition to the need for clarity regarding what services are being 

provided for the prepetition flat fee and the postpetition flat fee, there is the issue 

of what services must be included as part of the prepetition services – the 

services an attorney must provide when retained by a consumer debtor, 

regardless of whether the debtor signs a postpetition retainer agreement.

If there are certain services that must be provided prepetition, then any of 

those services promised postpetition cannot be considered in determining the 

reasonableness of the postpetition flat fee charge. That in turn leads to the 

question of whether the services provided prepetition meet the standards of 

competency required by the Florida Bar Rules and the requirements of Fed. R.

Bankr. P. 9011(b) and 11 U.S.C. §707(b)(4)24F

25.

24 This does not mean these types of services must be excluded from the list of services to be 

provided “if necessary.” See, e.g., the McCoy Postpetition Agreement.

25 Section 707(b)(4) provides: 

(C) The signature of an attorney on a petition, pleading, or written motion shall

constitute a certification that the attorney has--

(i) performed a reasonable investigation into the circumstances that gave 

rise to the petition, pleading, or written motion; and

(ii) determined that the petition, pleading, or written motion--

(I) is well grounded in fact; and

(II) is warranted by existing law or a good faith argument for the 

extension, modification, or reversal of existing law and does not 

constitute an abuse under paragraph (1).

(D) The signature of an attorney on the petition shall constitute a certification that 

the attorney has no knowledge after an inquiry that the information in the 

schedules filed with such petition is incorrect.

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21

In determining the answer to these questions, courts must consider what 

services are required in any representation, whether required by applicable state 

professional bar rules, the Bankruptcy Code and Bankruptcy Rules, and that

court’s local rules. 

Competency

Rule 4-1.1 of the Florida Bar Rules states that: 

A lawyer must provide competent representation to a client. 

Competent representation requires the legal knowledge, skill, 

thoroughness, and preparation reasonably necessary for the 

representation. 

The comment to Rule 4-1.1 notes that: 

Competent handling of a particular matter includes inquiry into and 

analysis of the factual and legal elements of the problem, and use of 

methods and procedures meeting the standards of competent 

practitioners. 

Thus, there is no question that an attorney must meet with a potential 

bankruptcy client and review sufficient information to competently advise the 

potential client whether to file bankruptcy and, if so, under what chapter. 

Unbundling

Rule 4-1.2 of the Florida Bar Rules states that: 

(c) Limitation of Objectives and Scope of Representation. If not 

prohibited by law or rule, a lawyer and client may agree to limit the 

objectives or scope of the representation if the limitation is 

reasonable under the circumstances and the client gives informed 

consent in writing.

“Informed consent” and “reasonable” are both defined in the Florida Bar Rules. 

“Reasonable” is defined as “conduct of a reasonably prudent and competent 

lawyer.” “Informed consent” is defined as follows: 

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 21 of 41
22

“Informed consent” denotes the agreement by a person to a proposed 

course of conduct after the lawyer has communicated adequate 

information and explanation about the material risks of and 

reasonably available alternatives to the proposed course of conduct.

What a “reasonably prudent and competent” chapter 7 consumer 

practitioner should do is framed by the Bankruptcy Code and this Court’s Local 

Rules. This Court’s Local Rule 2090-1(E) states that an attorney who makes an 

appearance in a case on behalf of a debtor is required, at a minimum, to assist 

the debtor with respect to all of his or her obligations under 11 U.S.C. §521. 

Section 521 contains many requirements, some of which are prepetition 

requirements such as filing the list of creditors, some of which are postpetition

requirements such as providing documents to the trustee, and some of which 

should take place prepetition but often do not, such as filing the bankruptcy 

schedules, the statement of financial affairs, and payment advices. Local Rule

2090-1(E) requires counsel of record to perform all section 521 responsibilities 

unless and until the Court permits the attorney to withdraw. 

Both Law Firms acknowledge that, regardless of whether the debtor signs 

a postpetition agreement, the firm is attorney of record for the debtor until the 

firm is allowed to withdraw, meaning that the firm is responsible for representing 

the debtor25F

26 if withdrawal has not been approved by that date.

Several of the other bankruptcy courts that have looked at the issue of 

what core services must be provided if a lawyer accepts a consumer bankruptcy 

26 Attending the 341 meeting is not listed in section 521. The Law Firms include attendance at 

the 341 meeting as a postpetition service, one that they do not need to provide if the debtor does 

not sign an agreement to provide postpetition services. However, both Law Firms acknowledge

they must represent the debtors at the 341 meeting if they have not been permitted to withdraw. 

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 22 of 41
23

case have looked to both the courts’ local rules and the state’s bar rules. In In re 

Slabbinck, 482 B.R. 576 (Bankr. E.D. Mich. 2012), the court framed the analysis

as what are the “services . . . necessary to achieve the basic, fundamental 

objectives of the representation.” 482 B.R. at 584 (quoting In re Egwim, 291 B.R.

559 (Bankr. N.D. Ga. 2003)). The Slabbinck court agreed with the Egwim court 

that the fundamental objectives for a chapter 7 consumer debtor are to obtain 

his or her discharge and retain his or her exempt assets.26F

27 But, the Slabbinck

court held, neither the Bankruptcy Code nor the applicable Michigan Rules of 

Professional Conduct “requires that the attorney represent the individual debtor 

in all matters necessary to pursue the client’s ultimate objective.” Slabbinck, 482 

B.R. at 592. The court concluded: 

[C]ompetence of a Chapter 7 debtor’s attorney is most appropriately 

evaluated by looking at the actual work that was agreed to be 

performed and then was performed by the attorney, not by looking 

at the remaining work that will have to be done to complete the case

when the individual has not hired the attorney to perform those 

services and the attorney has not performed those services.

Id. at 593.27F

28

In Hazlett, the court was required to consider this issue in the context of 

its court’s Local Rule 2091-1, which rule requires that an attorney represent a 

debtor in all aspects of the case, including adversary proceedings.28F

29 The court 

27 The Slabbinck court disagreed with the Egwim court’s ultimate holding that, except under very 

limited circumstances, a consumer chapter 7 lawyer is “all in” including representation of debtors 

for all adversary proceedings. 

28 The court noted that chapter 13 practitioners frequently file “bare bones” petitions, filing the 

balance of the schedules and other documents postpetition. The court observed there is no 

“principled basis to hold that an attorney who files a bare bones Chapter 7 petition for a prepetition fee . . . is automatically acting less competently.” Id. 29 U.S. Bankruptcy Court, District of Utah Local Rule 2091-1 provides: “Scope of Representation. 

A debtor’s attorney must represent and advise the debtor in all aspects of the case, including the 

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24

held that the rule is not violated if the debtor chooses not to continue with the 

attorney postpetition.29F

30 The court did not provide concrete guidance on how 

those services must be bifurcated other than to note that the debtor and counsel

both must be fully informed regarding the appropriateness of bankruptcy as an 

option, and, if so, under which chapter of the Bankruptcy Code the case should 

be filed. 

In Carr, the court held the following prepetition services were adequate:

preparing and filing the petition and the creditor matrix, the application to pay 

the filing fee in installments, and the statement of attorney compensation.30F

31 613 

B.R. 427 at 431-32.

But in In re Prophet, 2021 WL 1186187 (Bankr. D.S.C. 2021), the court 

rejected the holdings of all of the above cases, determining that under section 

§ 341 Meeting, motions filed against the debtor, reaffirmation agreements, agreed orders, and 

other stipulations with creditors or third parties, and post-confirmation matters. The debtor’s 

attorney must also represent the debtor in adversary proceedings filed against the debtor unless, 

pursuant to this rule, the Court has excused the attorney from this requirement. The scope of 

representation cannot be modified by agreement.” (emphasis added).

30 The Utah State Bar issued an ethics opinion on the use of “zero down” bankruptcy filings, 

bifurcated fee agreements, and the factoring of attorney’s fees, including whether and when such 

arrangements involved impermissible unbundling. The court made clear that unbundling, while 

permitted by the Utah bar rules, was not permitted under Local Rule 2091-1, but that a 

bifurcated fee arrangement, where only the timing of services and the associated payment are 

separate, is not unbundling. Hazlett, 2019 WL 1567751, at *7-8.

31 Postpetition services in Carr were listed as: “Scope of Post-Filing Routine Services: Attorney 

shall: (1) meet with client; (2) review available documentation and information; (3) transmit 

required documents to the UST and to the chapter 7 trustee: (4) file any documents, lists, 

statements, applications required to complete the petition after reviewing such with client; (5) 

appear at the meeting of creditors; (6) draft and file not more than one responsive pleading to a 

motion for relief from stay; (7) take reasonable measures to retrieve any and all monies garnished 

within 90 days of the bankruptcy filing; (8) review and execute any reaffirmation or assumption 

of lease agreements; (9) arrange for the required financial management course; and (10) pay filing 

fee of $335.00. (the ‘post-filing routine services’).” 613 B.R. 427 at 432. Certain other matters, 

such as adversary proceedings, would be provided at an hourly rate. Id. at 432-33.

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707(b)(4) and that court’s own local rule31F

32, an attorney who filed a bankruptcy 

case on behalf of a debtor was required to represent the debtor in all matters

relating to the representation except for adversary proceedings and appeals. The 

Prophet court required the attorney to return to the debtors all fees that he had 

received postpetition in accordance with signed postpetition agreements. Id. at 

*11.

To address the issues of competency and unbundling, this Court holds 

that any lawyer choosing to represent a debtor must comply with the Bankruptcy 

Code, the Bankruptcy Rules, the Florida Bar Rules, and this Court’s Local Rules. 

These statutes and rules collectively require sufficient inquiry by the attorney, 

not staff, when initially meeting with a client to ascertain whether filing 

bankruptcy is the appropriate relief, determining under what chapter a 

bankruptcy case could or should be filed, and additionally compel the attorney

to adequately inform a potential debtor of the consequences of that choice. 

Further, the attorney must assist the debtor with all of the debtor’s obligations 

under section 521 unless he or she is permitted to withdraw. The attorney must 

prepare and file all documents necessary to commence the bankruptcy case, 

which includes, at a minimum, the petition, the creditor’s matrix, any motion to 

waive or pay the filing fee in installments, the statement of attorney 

compensation, and the Debtor Credit Counseling Certificate, or, if applicable, a 

motion to waive the need to file or file late, the certificate (collectively the 

32 The Prophet court acknowledged a South Carolina ethics rule allowing limited representation,

similar to Rule 4-1.2 of the Florida Bar Rules, but rejected its applicability in light of the 

bankruptcy court’s local rule regarding the required scope of representation.

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 25 of 41
26

“Minimum Required Documents”). And finally, the attorney must attend the 

section 341 meeting of creditors unless he or she is permitted to withdraw prior 

to the meeting. 

The Court recognizes that there are circumstances in which a debtor 

comes to the attorney on an emergency basis and the attorney must file a bare 

bones petition. But even in that circumstance the attorney and the debtor must 

be sufficiently informed prior to filing the petition to comply with Rule 9011, and 

certain documents must be prepared and filed. 

Disclosure Issues – the Debtor

A fundamental premise of all the fee bifurcation cases is disclosure. “The 

propriety of using bifurcated fee agreements in consumer chapter 7 cases is 

directly proportional to the level of disclosure and information the attorney 

provides to the client and the existence of documentary evidence that the client 

made an informed and voluntary election to enter into a postpetition fee 

agreement.” Hazlett, 2019 WL 1567751 at *8. 

The issues of disclosure to the debtor include timing and clarity. When 

should the disclosures be given and how clear should the disclosures be? Is the 

disclosure misleading if it includes services that could not possibly ever be 

needed in a particular case, such as listing motions to value or objecting to a 

student loan claim? What about services that may or may not be required, such 

as attending a 2004 examination, or opposing a motion for relief from stay? 

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Rule 4-1.2 of the Florida Bar Rules requires that the limitation on scope 

of representation must be reasonable and the client give “informed consent in 

writing.” 

In Carr, the court found that the separate fee agreements it reviewed

complied with the disclosure requirements by specifically describing what 

services were being provided prepetition and what services were being provided 

postpetition. The approved prepetition agreement also clearly described to the 

debtor what the debtor’s options were if the debtor chose not to enter into a 

postpetition agreement with the attorney.32F

33 The agreement also disclosed that if 

the debtor did not pay the postpetition agreed-upon fees, the debtor could be 

sued for non-payment and the debt would not be discharged. The court in Carr

also approved the postpetition description of excluded services, including 

adversary proceedings and motions for relief from stay, which, the agreement 

stated, would be charged at an hourly rate of $200.00. 

In Walton, Judge Williamson held that the “two contract” disclosure must 

be set forth on a separate cover page and must clearly explain the debtor’s three 

options: continue with current counsel, proceed pro se, or retain new counsel. 

In Hazlett, the court found adequate a prepetition disclosure that clearly 

described the debtor’s options before filing: (a) pay up front; (b) pay a small fee 

up front and, after the petition was filed, (i) sign a postpetition agreement with 

a certain fee, (ii) proceed pro se, or (iii) retain another firm; or (c) pay no money 

33 Similar to the local rules discussed in all of the above cases as well as this Court’s Local Rules, 

an attorney is counsel of record until allowed to withdraw. In Carr, the court stated it did not 

need to address that rule since the attorney did not seek to withdraw from any of the cases.

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 27 of 41
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up front and (i) sign a postpetition agreement with a certain fee after the petition 

was filed, (ii) proceed pro se, or (iii) retain another law firm. In addition, the 

attorney provided the debtor with other extensive disclosures regarding 

bankruptcy filings, possible factoring of fees,33F

34 and the importance of providing 

true, complete, and accurate information in advance of filing the bankruptcy

case.

In the instant cases, the UST argues that the description of prepetition

services and postpetition services in the Fee Agreements overlap and were, to 

some extent, duplications, or include services that were never performed or 

would never have arisen in the case due to the nature of the Debtor’s assets and 

liabilities. The Court recognizes that there are times when what would normally 

be a prepetition service, such as preparation of the bankruptcy schedules and 

statement of financial affairs, may occur postpetition, especially when the filing 

is an emergency filing. But in such a case, the disclosure must make clear that 

the particular service will be performed postpetition only if not completed 

prepetition. The agreement should also make clear whether amendments to 

documents are included in the fee, and if the amendment of certain documents 

is not included, what those documents are.

With respect to the adequacy of disclosure to the debtor, the Court holds

that the disclosures may include services that may or may not be performed, and 

34 None of the Law Firms factored their fees so this opinion does not address the adequacy of any 

disclosures relating to factoring. However, the Court has determined that it will not allow any 

attorney to factor its legal fees. This creates an inherent conflict of interest between the attorney 

and the debtor, and violates R. Regulating Fla. Bar 4-5.4, 4-1.8, and 4-1.7. 

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 28 of 41
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services that at the time of retention are clearly not required, so long as the 

agreement makes clear that some of the listed services will not arise in a 

particular case. The issue of whether possible services were actually performed 

or could have ever been necessary is something the Court may consider in 

determining the reasonableness of the postpetition flat fee. 

The postpetition agreement, if it is signed immediately following the 

petition, must include a 14-day rescission period and describe the consequences 

if the debtor rescinds the agreement. Alternatively, the debtor should be given a 

14-day window after the petition is filed in which to sign a postpetition 

agreement. The prepetition agreement must disclose that regardless of whether 

the postpetition agreement is signed, the attorney must continue to represent 

the debtor unless allowed to withdraw.34F

35 If the postpetition agreement has a 

rescission clause, it must contain the same disclosure. And the postpetition 

agreement must clearly state that the obligation to pay fees under the 

postpetition fee agreement is not an obligation that will be discharged when the 

debtor receives his or her bankruptcy discharge.

The debtor must be given a separate disclosure form that discloses he or 

she is being provided the option to choose the bifurcated fee arrangement, and 

whether the bifurcated fee arrangement will have a different cost than a flat fee 

arrangement paid in advance of the filing. The disclosure should also clearly 

describe the debtor’s options, including the consequences of choosing a 

35 Each of the Fee Agreements in this opinion disclosed that counsel would continue to represent 

the Debtor postpetition until allowed to withdraw even if the Debtor did not sign the postpetition 

agreement. 

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30

particular option: (a) sign the postpetition agreement and get the services 

described in that agreement at the stated cost (flat fee or hourly rate); (b) do not 

sign the agreement, and once the attorney is permitted to withdraw, proceed with 

the case without a lawyer; or (c) retain a new lawyer postpetition.

A final issue regarding disclosures is when the proposed agreements and 

disclosures should be presented to the debtor. In order for a debtor to make a 

fully informed decision regarding his or her choices, the debtor must be 

presented with the separate disclosure, the prepetition agreement and the 

postpetition agreement when asked to sign the prepetition agreement. A debtor 

cannot make an informed decision regarding a bifurcated arrangement without 

knowing what the “other side” agreement includes and requires. If the debtor 

signs the prepetition agreement the debtor must also sign the separate 

disclosure. 

Thus, the Court holds that disclosure to a potential client is adequate so 

long as 

a) The potential debtor receives the separate disclosure form; 

b) The prepetition agreement and postpetition agreement are 

provided at the same time for the potential debtor’s review; 

c) The prepetition agreement clearly describes the services that 

must be performed prepetition as well as other services that 

may be provided; and

d) The postpetition agreement clearly describes the included 

services (delineated, where appropriate as “if necessary”); and 

specifically describes the excluded services, and any 

additional flat fee or hourly charge associated with those 

excluded services. 

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 30 of 41
31

Disclosure Issues – the Court

In addition to the critical importance of disclosure to the client, attorneys 

also must make sure that any bifurcated fee arrangement is properly disclosed 

to the Court and to parties in interest.

Bankruptcy Rule 2016 requires that every attorney for a debtor (regardless 

of whether the attorney is applying for compensation) shall file the statement 

required by section 329. Section 329 requires a disclosure of the compensation 

paid or to be paid if the agreement was made within one year before the date of 

filing the petition for services rendered or to be rendered in contemplation of or 

in connection with the case, and the source of the compensation. While in each 

case before the Court the Form 2030 Fee Disclosure disclosed the fees paid and 

those agreed to be paid, none of the forms disclosed that the “to be paid” portions 

of the fees were contingent upon the debtor’s execution of, or agreed to by virtue 

of, an agreement signed postpetition nor that the fees were to be paid on a 

monthly basis. 

Both Law Firms acknowledge that the Form 2030 Fee Disclosure needs to 

be amended when and if a debtor signs a postpetition agreement, and, if the fees 

are being paid monthly, disclose the details of the monthly payment 

arrangement. The UST argues that the Form 2030 Fee Disclosure must be 

amended, and disclosure needs to be made, each time the law firm receives 

payment – meaning every month if payments are due monthly. The Court finds 

that this level of disclosure is not necessary so long as the form is amended when

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 31 of 41
32

the postpetition agreement is signed, and that the amended form discloses the 

payments that will be made monthly.

Schedule J requires that a debtor list all monthly expenses. The UST 

argues, and both Law Firms agree, that if a debtor signs the postpetition

agreement and it includes a monthly payment, Schedule J must be amended to 

reflect the payment obligation, and then amended again, once the monthly 

payments are completed. The Court does not agree. Schedules I and J reflect 

information as of the petition date. As of the petition date, a chapter 7 debtor 

does not have an obligation to pay an attorney a fee postpetition. Once the debtor 

signs the postpetition fee agreement, the debtor’s counsel must file the Form 

2030 Fee Disclosure. There is no need to amend Schedule J. 

Timing and Rescission

A postpetition fee agreement cannot be signed prepetition; otherwise it is 

a contract subject to rescission. However, a postpetition agreement signed 

immediately after the petition is filed does not provide the debtor with any 

meaningful opportunity to consider his or her options. Judge Williamson in 

Walton and other courts require some sort of “breathing room” for the debtor to 

sign or be obligated under the postpetition agreement. In Walton, Judge 

Williamson approved a 14-day rescission period. In Carr, the court approved a 

14-day period between the petition date and the signing of the postpetition 

agreement. In each case, the law firm was required to continue representing the 

debtors until allowed to withdraw. The Court finds that it is necessary and 

appropriate for the debtor to have a rescission period. Therefore, any 

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 32 of 41
33

arrangement that gives the debtor a 14-day “cooling off” period, whether after 

the prepetition agreement is signed, or until the postpetition agreement must be 

signed, is acceptable to the Court.

Financing the Filing Fees

Is the filing fee a prepetition or postpetition charge? Does a prepetition 

agreement by a debtor to reimburse the filing fee through a postpetition 

agreement violate 11 U.S.C. §526 because the law firm is advising the debtor to 

incur debt in anticipation of bankruptcy or to pay for bankruptcy related legal 

services? 

In the Brown Case and in the Mcfarland Case nothing was paid up front 

and the filing fees were paid by the Semrad Law Firm at the time the petitions 

were filed and then repaid through the monthly payment.35F

36 The Semrad Law 

Firm argues that the filing fee is due postpetition and therefore, appropriately 

included as a postpetition charge, because CM/ECF does not actually charge the 

fee until all of the documents to file the case have been uploaded. However, the 

Semrad Law Firm acknowledged in oral argument that, regardless of whether 

the debtor signs the postpetition fee agreement, if the Semrad Law Firm doesn’t 

pay the filing fee immediately, its CM/ECF privileges will be suspended until the 

fee is paid. Moreover, Fed. R. Bankr. P. 1006 requires that the filing fee 

“accompany” the petition.

36 The Van Horn Law Firm charged Ms. McCoy $335.00 in advance; the balance of any fees was 

only due upon execution of an agreement for postpetition retention. In oral argument, counsel 

for the Van Horn Law Firm alternatively argued that the $335.00 was the filing fee, (the filing fee 

on the McCoy Petition Date was $335.00) or was attorney fees with the filing fee paid postpetition 

(and financed through the monthly payments). The McCoy Prepetition Agreement makes clear 

the $335.00 was an attorney fee, not the filing fee. 

Case 20-23632-LMI Doc 30 Filed 06/16/21 Page 33 of 41
34

The Semrad Law Firm relies on Carr. In Carr the court held that the 

payment of the filing fee by the law firm36F

37, which was repaid postpetition over 

time, was acceptable so long as the payments were applied first to the filing fee, 

as required by 28 U.S.C. §1930.37F

38, 38F39 

In addition to whether this type of fee repayment arrangement is 

prohibited by the Bankruptcy Code, the Court must consider whether the 

payment of the filing fee by a law firm with the expectation of repayment, either 

immediately or over time, violates R. Regulating Fla. Bar 4-1.8(e) which states 

that:

A lawyer is prohibited from providing financial assistance to a client 

in connection with pending or contemplated litigation, except that:

(1) a lawyer may advance court costs and expenses of 

litigation, the repayment of which may be contingent on the 

outcome of the matter; and

(2) a lawyer representing an indigent client may pay court 

costs and expenses of litigation on behalf of the client.

(emphasis added).39F

40

37 The Carr court distinguished the Eleventh Circuit’s holding in Cadwell v. Kaufman, 886 F.3d 

1153, 1156 (11th Cir. 2018). In Cadwell, the Eleventh Circuit held that an attorney violates 

section 526 if the attorney advises the client to use a credit card to pay attorney fees. The Carr 

court observed that “this prohibition does not prevent a debtor from paying their [sic] counsel’s 

legal fees directly over time.” In re Carr, 613 B.R. at 437. 38 The court also held that because the outlay for the filing fee was repaid postpetition prior to 

paying any attorney fees, the arrangement did not violate Fed. R. Bankr. P. 1006(b)(3).

39 The UST argues that filing fees were really not an issue in Carr because the debtor paid the 

filing fee. The UST is not correct; the Carr court addressed the section 526 issue directly.

40 The Comment to R. Regulating Fla. Bar 4-1.8 provides:

Financial assistance

Lawyers may not subsidize lawsuits or administrative proceedings brought on 

behalf of their clients, including making or guaranteeing loans to their clients for 

living expenses, because to do so would encourage clients to pursue lawsuits that 

might not otherwise be brought and because financial assistance gives lawyers 

too great a financial stake in the litigation. These dangers do not warrant a 

prohibition on a lawyer advancing a client court costs and litigation expenses, 

including the expenses of diagnostic medical examination used for litigation 

purposes and the reasonable costs of obtaining and presenting evidence, because 

these advances are virtually indistinguishable from contingent fees and help 

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The Semrad Law Firm argues that because subsection (e)(1) states that 

the repayment “MAY be contingent on the outcome of the matter” repayment 

does NOT have to be contingent on the outcome of the matter. Moreover, the 

Semrad Law Firm argues, as reflected in the comment to Rule 4-1.8(e), the 

purpose of advancing the fee on behalf of a debtor is, like advancing costs in a 

contingency fee case, an access to justice issue. The Semrad Law Firm 

acknowledges it has not found any case that has allowed (or disallowed) cost 

advances in a non-contingency lawsuit.

The Court finds that a law firm’s payment of the filing fee with postpetition 

repayment by the debtor violates the Bankruptcy Code as well as the Florida Bar

Rules.40F

41 The filing fee is due upon the filing of the bankruptcy petition. Therefore,

the debtor’s obligation to repay the filing fee to the firm is a prepetition obligation 

that is dischargeable. A law firm that advances the fee with the expectation of 

repayment postpetition is violating section 526 by advising the debtor to incur a 

debt “to pay for bankruptcy related legal services”, violating 11 U.S.C. §362 and, 

assuming the debtor gets his or her discharge, violating 11 U.S.C. §524.

ensure access to the courts. Similarly, an exception allowing lawyers representing 

indigent clients to pay court costs and litigation expenses regardless of whether 

these funds will be repaid is warranted. 41 The Court is aware that law firms may be fronting the filing fees for debtors in cases filed under 

chapter 13. The rules discussed in this section apply to all chapters of the Bankruptcy Code. If 

a law firm is not paid the funds in advance to cover the filing fee or is not holding a retainer in 

its trust account sufficient to reimburse the cost of the filing fee, the law firm should re-examine 

this practice.

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Moreover, the payment of the filing fee is a violation of Rule 4-1.8(e).41F

42 The 

Court finds that the word “may” means that the attorney may advance costs the 

repayment of which is contingent on the outcome of the case, not that the 

attorney may always advance costs for a client regardless of whether the 

repayment is contingent on the outcome of the case. The interpretation

advocated by the Semrad Law Firm renders Rule 4-1.8(e) meaningless.42F

43 The 

Rule addresses the access to justice issue43F

44 by authorizing cost advances in 

contingency fee cases and allowing an attorney to advance costs on behalf of an 

indigent client.44F

45 A bifurcation agreement, like any other fee arrangement,

should give the debtor the three choices allowed by federal law: pay the fee up 

front, complete the paperwork to pay the filing fee in installments, or, if 

applicable, seek waiver of the filing fee.45F

46 

APPLICATION TO THESE CASES AND 

THE REQUEST FOR INJUNCTIVE RELIEF

The Court will now examine the Fee Agreements.

In order to assess the reasonableness of the fees charged in each of the 

three cases at issue, the Court must consider the services provided or promised 

by each firm prepetition and postpetition. As the Court has already noted, this

42 In Carr, the court held that the attorneys did not violate the Kentucky Rules of Professional 

Conduct by advancing the filing fee. The UST argues that the Kentucky Rules of Professional 

Conduct regarding financial assistance may be different than Florida’s; they are not. 

43 The Court acknowledges that Rule 4-1.8(e) could be written more clearly. Perhaps the Florida 

Bar will consider rewriting this particular sentence so there is no question whether attorneys 

may advance filing fees and other court costs for clients in all cases. 44 The comment to Rule 4-1.8(e) makes a distinction between paying a client’s living expenses,

which is never allowed, and advancing court costs and litigation expenses, which is permissible

as provided in the Rule. 45 If a debtor is indigent perhaps the attorney should take the case pro bono. 

46 See 28 U.S.C. §1930.

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determination is not driven by a comparison of the prepetition and postpetition

fees charged, nor, since in each instance a flat fee was charged, solely on the 

services actually performed postpetition.

The McCoy Prepetition Agreement did not adequately describe what 

services the Van Horn Law Firm agreed to provide prepetition for the flat fee 

charged but rather used the phrase “basic services.” Despite the lack of clarity 

of promised services, the Court finds that $335.00 is a reasonable fee for the 

prepetition services that were provided because the services included the initial 

client interview and the preparation of the bankruptcy schedules and the 

statement of financial affairs. 

Turning to the postpetition services promised or actually performed, the 

Court notes that postpetition the Van Horn Law Firm attended the 341 meeting 

and negotiated a settlement agreement with the chapter 7 trustee. And, of 

course, Ms. McCoy ultimately succeeded in obtaining her discharge. The McCoy 

Postpetition Agreement also included (if necessary) at no additional charge 

attendance at any 2004 examination conducted by the chapter 7 trustee, review 

and attendance at hearings for motions for relief from stay, preparation of

objections to and defense of such motions, and review of redemption and 

reaffirmation agreements. 

Law firms that have been paid in advance of filing charge debtors extra 

fees for all of the services just described. Thus, the Court finds that the 

postpetition flat fee of $1,565.00 was reasonable for the actual services that Van 

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Horn Law Firm performed and the potential services the Van Horn Law Firm 

would have provided if necessary for Ms. McCoy. 

The Semrad Law Firm did a better job of describing its prepetition services. 

Prepetition the Semrad Law Firm performed an initial client interview and, in 

both cases also prepared the petition, the schedules, and the statement of 

financial affairs. Since the Semrad Law Firm charged Ms. Brown and Ms. 

Mcfarland a flat fee of zero dollars for its prepetition representation, the Court 

finds the prepetition flat fee was reasonable. 

The Brown Case and the Mcfarland Case appear to have been 

unremarkable postpetition other than a continued 341 meeting, and so it 

appears that, other than attending the 341 meeting, and taking care of other 

matters generally incidental to getting a chapter 7 case to discharge and closing, 

the Semrad Law Firm did not have to do much postpetition for either Ms. Brown 

or Ms. Mcfarland. The services that the Semrad Law Firm agreed to provide to 

Ms. Brown and Ms. Mcfarland for the flat fee paid postpetition included

negotiating with the chapter 7 trustee regarding any property or actions adverse 

to the client, reviewing and negotiating reaffirmation agreements and motions to 

redeem, reviewing and responding to motions for stay relief, and preparing and 

serving any motions to avoid liens. All of these are services that other attorneys 

who get paid in advance would not provide without the payment of an additional 

fee postpetition. Thus, the Court finds that, based on the services performed 

and to be performed, if necessary, the Semrad Law Firm’s postpetition flat fee of 

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$1,262.00 in the Mcfarland Case and $1,362.00 in the Brown Case was 

reasonable and will be allowed. 

The Van Horn Law Firm and the Semrad Law Firm each advanced the 

filing fee and other costs for the Debtors. Although this Order holds that this 

practice is not permitted under the Florida Bar Rules, the Court will not require 

the filing fees to be disgorged. However, the Law Firms may not, in any new case

filed after entry of this opinion, advance the filing fee. If the debtor cannot pay 

the filing fee up front then part of the Law Firm’s prepetition services must

include preparation of a motion seeking waiver of the filing fee or a motion 

seeking to pay the filing fee in installments. 

Notwithstanding that the Court finds the Law Firms’ fees were reasonable, 

the Court finds that each of the Law Firms disclosures were either inadequate, 

misleading, or both. The McCoy Prepetition Agreement did not adequately 

describe what services are included as “Basic Services.” The McCoy Prepetition 

Agreement also did not clearly outline the Debtor’s three options postpetition:

sign, represent yourself, or hire another lawyer to do the postpetition work. 

The Brown Prepetition Agreement and Mcfarland Prepetition Agreement 

(collectively the “Semrad Prepetition Agreements”) state the law firm agreed to 

represent the Debtors “in all aspects of the case” but then conditioned that 

promise on the Debtor executing the postpetition agreement. There are other 

prepetition obligations described as postpetition services in the Semrad 

Prepetition Agreements such as advising the Debtor of her obligation to attend 

the 341 meeting. Advising a potential debtor of his or her responsibilities as a 

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debtor is clearly a prepetition obligation and should be explained when the 

process of bankruptcy is described to a potential client. The Semrad Prepetition 

Agreements also describe the filing fee as something the Court requires to be 

paid after the petition is filed. That is not accurate. The Brown Postpetition 

Agreement and Mcfarland Postpetition Agreement (collectively the “Semrad 

Postpetition Agreements”) included as a postpetition item services that must be 

provided prepetition including “advise Client(s) of the need to attend a debtor 

education course and provide a certificate of completion to the Firm.” That is 

misleading and must be fixed. The Semrad Prepetition Agreements also list 

postpetition services, which list includes, if necessary, sending “In re Mendiola” 

letters. The Court has no idea what these letters are, and presumably neither 

does a potential chapter 7 consumer client. 

All of this must be corrected, and presumably will be resolved when both 

Law Firms revise their agreements to comply with the requirements outlined in

this opinion. 

The Court will grant the UST’s request for injunction insofar as, as of the 

date of this Order, all attorneys, including the Law Firms, must stop their current 

practices relating to bifurcated fee arrangements unless those arrangements 

comply with the requirements outlined by this Court. The balance of the UST’s 

request is DENIED. 

CONCLUSION

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The parties asked the Court for guidance regarding bifurcated fee 

arrangements in chapter 7 cases. The Court holds that so long as attorneys 

offering a bifurcated fee arrangement comply with the terms of this Order, those 

arrangements do not violate the Bankruptcy Code or Bankruptcy Rules, this 

Court’s Local Rules, or the Florida Bar Rules. 

# # #

Copies furnished to:

Chad Van Horn, Esq.

Yevgeniy Feldman, Esq. 

Steven Schneiderman, Esq.

The Clerk of Court shall serve a copy of this order upon all interested parties 

who do not receive service by CM/ECF.

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