Are There Special Rules for the Debtor’s Attorney Under Subchapter V Bankruptcy?
A debtor’s attorney does have special rules when a borrower is filing under Subchapter V, but they do not differ from Chapter 11 cases.
Subchapter V is a streamlined and expedited form of bankruptcy under Chapter 11. When filing any type of bankruptcy, it is always recommended that you work with a bankruptcy attorney. An attorney can ensure there are no mistakes made, answer your questions, and ensure you receive the best outcome possible. When filing under Subchapter V, there are certain rules attorneys representing borrowers must follow.
What are the Special Rules for Debtors’ Attorneys in Subchapter V?
Subchapter V does not have special rules for attorneys. However, Subchapter V is a specific part of Chapter 11 bankruptcy. Chapter 11 bankruptcy does have special rules for borrowers’ attorneys, and they are as follows:
- Court authorization: Attorneys for borrowers must have formal authorization from the court to represent the debtor. Attorneys cannot earn any fees until they have this formal authorization.
- Disinterested person: Perhaps the most important rule for attorneys is the ‘disinterested person’ requirement. This rule means attorneys cannot have an interest that is unfavorable to the borrower’s estate or creditors.
- Disclosure obligation: Attorneys must file a sworn declaration, known as a Federal Rule of Bankruptcy Procedure 2014(a) statement. This statement discloses all connections with the borrower, creditors, and any other interested party. The disclosure obligation is strictly enforced, and if an attorney fails to do this, they may be disqualified from the case and forfeit all fees.
- Fiduciary duty: Attorneys in all Chapter 11 cases have a fiduciary duty not only to the borrower but also to the creditors and the bankruptcy estate.
- Approval of fees: Any fees paid to the borrower’s attorney must be scrutinized and approved by the court. The reason for this scrutiny is that any payments made by the borrower to the attorney may also be used to pay creditors. Attorney fees must be confirmed as reasonable by the court.
- Reporting requirement: Attorneys must also help borrowers prepare and file extensive documentation with the court, including statements of financial affairs, schedules of assets and liabilities, and operating reports.
The above rules are meant to ensure that attorneys retained by borrowers act in the best interest of everyone involved in the bankruptcy process and maintain the integrity of the court system.
How Can an Attorney Help with Subchapter V?
Although there are many rules they must follow, attorneys are an invaluable help during the Subchapter V process. When working with you, an attorney will:
- Ensure that you qualify for Subchapter V
- Help draft the reorganization plan to ensure it is fair and feasible
- Ensure all legal requirements are met to prevent delays or dismissal of your case
- Negotiate with creditors on your behalf
- Help you work with the bankruptcy trustee, which is an important part of the process
Call Our Bankruptcy Lawyer in South Florida for Help Today
At Brian K. McMahon, P.A., our South Florida bankruptcy lawyer can guide you through the Subchapter V process, answer all of your questions, and help you obtain the best possible outcome. Call us now at (561) 658-1789 or contact us online to schedule a consultation and to get the legal help you need.