In re Welch

647 B.R. 518

IN RE: Tiffany Marie WELCH, Debtor(s).

C/A No. 21-02884-EG

United States Bankruptcy Court, D. South Carolina.

Signed December 6, 2022

Linda Barr, Office of United States Trustee, Columbia, SC, for U.S. Trustee.

Jason T. Moss, Moss & Associates, Attorneys, P.A., Columbia, SC, for Debtor(s).

ORDER GRANTING IN PART AND DENYING IN PART REQUEST FOR ALLOWANCE OF FEES PURSUANT TO 11 U.S.C. §§ 330(a) & 503(b)(2)

Elisabetta G. M. Gasparini, United States Bankruptcy Judge

THIS MATTER is before the Court for consideration of the allowance of attorney fees claimed pursuant to 11 U.S.C. § 330(a) and SC LBR 2016-1(b) to be paid through the Debtor's confirmed chapter 13 plan as an administrative expense pursuant to 11 U.S.C. § 503(b)(2). Jason Moss ("Moss") of Moss & Associates, Attorneys P.A. (the "Firm"), counsel for Tiffany Marie Welch ("Debtor") claims the fees through a Statement of Supplemental Chapter 13 Attorney Fees After Confirmation ("Supplemental Fee Statement") filed with the Court. Both the Chapter 13 Trustee ("Trustee") and the United States Trustee ("UST") filed objections. More specifically, Moss seeks the award of fees in the amount of $2,484.00, in addition to the Expedited Fee (as defined below) of $4,000.00, for services related to (i) seeking a moratorium of payments under the confirmed chapter 13 plan (the "Motion for Moratorium") and (ii) helping the Debtor apply for modification or forgiveness of her student loans beyond any relief available pursuant to 11 U.S.C. § 523(a)(8) or other provisions of the Bankruptcy Code or Rules through an online portal outside of the chapter 13 plan process.

The Court held an evidentiary hearing on this matter on November 3, 2022. Korey Williams ("Williams"), a recently hired bankruptcy legal assistant, and Chi Anne Walling ("Walling"), a bankruptcy paralegal, testified on behalf of the Firm. After consideration of the evidence admitted into the record, the testimony presented, the parties’ arguments, and applicable law, the Court enters the following findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52(a)(1).¹ For the reasons stated below, the Court will allow only supplemental fees in the amount of $400.00 pursuant to 11 U.S.C. § 330(a)(4) and SC LBR 2016-1(b)(2) for services related to the Motion for Moratorium as administrative expense to be paid through the plan.

FINDINGS OF FACT

I. BACKGROUND OF THE DEBTOR'S CASE

On January 12, 2017, the Debtor filed a Chapter 13 petition, initiating C/A No. 17-00160-DD. The case was then converted to Chapter 7, and the Debtor received a discharge pursuant to 11 U.S.C. § 727.² Accordingly, under 11 U.S.C. § 1328(f)(1), the Debtor is not eligible for another bankruptcy discharge until 2025. On November 8, 2021 (the "Petition Date") —less than a month after her prior case was closed—the Debtor filed the current Chapter 13 case with the Firm's assistance. The Debtor's schedules in the current case indicate she has one creditor with a claim for $7,500.00 secured by her vehicle and unsecured debts totaling $83,655.80, of which $80,097.00 are for the same student loans that were also not discharged in the prior case.³

On January 24, 2022, the Court entered an Order Confirming Chapter 13 Plan.⁴ The confirmed plan pays the value of the secured claim of the Debtor's only secured creditor, provides for monthly payments of $239.00 for two months followed by $245.00 for 58 months, and anticipates that unsecured creditors will receive less than a 100% distribution on their claims.⁵ The plan does not contain any specific provision addressing student loans.

II. INITIAL DISCLOSURE OF COMPENSATION AND RETAINER AGREEMENT

The Debtor and the Firm entered into a retainer agreement (the "Retainer Agreement") three days prior to the Petition Date, a copy of which accompanies the Disclosure of Compensation of Attorney for Debtor (Form B2030) (the "Initial Disclosure of Compensation"), as required by 11 U.S.C. § 329 and Fed. R. Bankr. P. 2016(b). According to the Initial Disclosure of Compensation, the Firm agreed to charge the $4,000.00 fee set forth in the expedited fee approval procedures found in SC LBR 2016-1(b), as supplemented by the Common Chambers Guidelines, for a chapter 13 individual case (the "Expedited Fee"),⁶ $286.00 of which was paid to the Firm prior to the Petition Date, and the $3,714.00 balance remained to be paid through the confirmed chapter 13 plan. In exchange for the Expedited Fee, the Firm agreed to render legal service for "all aspects of the bankruptcy case," including certain enumerated services. The Initial Disclosure of Compensation further stated:

By agreement with the debtor(s), the above-disclosed fee does not include the following service: Representation of the debtors in any dischargeability actions, judicial lien avoidances, relief from stay actions, motions to incur debt, motions to sell property, moratoriums , motions to reconsider, plan modifications after confirmation, motions to reopen, motions to redeem, or any other adversary proceeding.

ECF No. 1 at p. 12 (emphasis added). Services in connection with student loans were not expressly excluded in the Initial Disclosure of Compensation.

The Retainer Agreement attached to the Initial Disclosure of Compensation sets forth in more detail the services to be provided and those excluded from the Expedited Fee and states, in pertinent part:

[The Firm] agrees that, in exchange for payment of the above specified fees, [the Firm] shall perform all services associated with the bankruptcy matter except for those specifically listed on Schedule A, attached hereto . If additional fees are incurred as specified in Schedule A, Client shall be responsible for such fees. However, Client acknowledges that [the Firm] may be able to file a supplemental claim with the bankruptcy court, which would allow payment out of assets of the estate or Chapter 13 plan payments.... The parties further agree that all fees paid under this agreement are non-refundable and earned immediately by [the Firm] except as set out in the Termination clause below.

ECF No. 1 at p. 14 (emphasis added).

Schedule A attached to the Retainer Agreement lists 15 services excluded from the Expedited Fee. It does not specify the fees that would be charged for such services, but states that "[s]pecific fees will vary, as amounts approved by the different trustees may be inconsistent and/or may change over the life of your bankruptcy." Legal services related to student loan assistance and motions for moratorium are not specifically listed on Schedule A; however, the list includes "Resolving or Defending Post-Confirmation Petition to Dismiss by Trustee" as an excluded service. Schedule A also states that "[t]his list is not exclusive, as there may be other types of services that arise, which are not contemplated by the original retainer agreement."

Also attached to the Retainer Agreement is a Disclosure of Additional Attorney's Fees ("Initial Additional Fees Disclosure"). While it does not indicate how it relates to (or whether it controls over) Schedule A, it provides an extensive list of 43 services and their related fees and states that "[t]hese fees are in addition to expedited attorney fees as referenced in the signed attorney client agreement." "Motion for Moratorium" is listed on the Initial Additional Fee Disclosure as an excluded service with a supplemental attorney's fee of $885.00, and "Resolve Petition to Dismiss by Trustee" is also listed for a supplemental fee of $350.00. Services related to student loan assistance, however, are not included on the list of excluded services.

The Initial Additional Fees Disclosure further provides that if the Debtor has "an issue that requires legal work greater than the above-referenced amounts, a request for approval of additional fees will be submitted to the Bankruptcy Trustee and Bankruptcy Court," with attorney services being charged at $500.00 per hour or, if a contingency agreement is employed, such services would be paid at 40%.

III. WORK PERFORMED IN DEBTOR'S CASE

a. Motion for Moratorium

On July 14, 2022, the Trustee filed a Petition to Dismiss, requesting dismissal of the case if the Debtor did not cure a $490.00 arrearage in plan payments.⁷ At the hearing, Walling testified she contacted the Debtor regarding the Petition to Dismiss to setup an appointment between her and Moss. After that consultation, the Debtor signed an informal settlement agreement that had been prepared by the Trustee to resolve the Petition to Dismiss. The Trustee subsequently requested, and, on August 8, 2022, the Court entered a form order denying the Trustee's Petition to Dismiss based upon the settlement agreement reached between the Debtor and the Trustee.⁸ The Debtor then met with Moss and decided to seek a two-month moratorium (and thus a deferral of $490.00 of her plan payments). On August 19, 2022, the Debtor filed the Motion for Moratorium on a standard form the Firm uses for such motions along with an attached form Notice of Motion and a proposed order.⁹

Walling testified that around two hours of work—between her and Moss—were spent performing services in connection with the Motion for Moratorium, though she did not know the exact time they respectively spent on the task. The Firm does not keep time records given their use of the expedited fee procedure and the volume of cases they handle; as Walling stated, "[they] would not be able to serve [their] clients" if they did. The services related to the Motion for Moratorium included (i) reviewing the Petition to Dismiss; (ii) contacting the Debtor in reference to the past due amounts; (iii) reviewing the form order denying the Petition to Dismiss; (iv) changing the case caption and hearing information on the form Notice of Motion for Moratorium; (v) reviewing information on the Trustee's network to determine the amount of the Debtor's plan arrearage to determine how many months of moratorium were needed; (vi) cha...