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            In Easley v. Collection Service of Nevada,[1] the U.S. Court of Appeals for the Ninth Circuit permitted the debtors to recover attorneys’ fees and costs incurred while appealing fees awarded for a willful violation of the automatic stay pursuant to 11 U.S.C. § 362(k)(1).

         Concluding long and contentious litigation, the Sixth Circuit Court of Appeals recently affirmed a determination by the U.S. Bankruptcy Court for the Southern District of Ohio awarding sanctions against a creditor and its counsel who engaged in sanctionable, bad-faith misconduct during the prosecution of a chapter 11 bankruptcy case.[1]

What expenses can an oversecured creditor tack on to its claim, and what expenses related to the sale of a mortgaged property can be surcharged against the claims of such a creditor?

Judge Nancy Hershey Lord recently considered these questions in a contentious case involving property at 3126 Coney Island Avenue in Brooklyn — a valuable apartment building only a couple of blocks from the fabled Brighton Beach Boardwalk.[1]

Introduction

When seeking to collect post-petition fees from a chapter 7 debtor, beware of the conversion. If former counsel files a collection action against a debtor for post-petition fees in state court, failing to stay the action after a conversion to a chapter 13 case will result in a stay violation.

The Ethics and Professional Compensation Committee had an active 2018. We strived to continue to provide our members with enlightening and useful substantive information, while also offering enjoyable and valuable social and networking opportunities.

The chapter 7 trustee, in a July 2018 ruling, was denied compensation for services that were held to be “customary and statutory duties” that provided no further benefit to the bankruptcy estate and were not outside of those normal duties. The chapter 7 trustee’s attorneys were allowed reasonable compensation; however, the court noted that many of the entries provided with the application for compensation were not related to legal services requiring an attorney license and were not allowed.

Procedural Background

In In re D’Arata,[1] the bankruptcy court ordered debtor’s counsel to disgorge the fee he received to represent the debtor in a chapter 7 case. The court also discussed and cautioned against the use of appearance counsel.