Burr & Forman

02.20.2017   |   Articles / Publications

Burr Alert: Court Rejects Lender’s Objection to Payment of Debtor’s Counsel’s Fees and Expenses from Pre-Petition Retainer

In a decision rendered on December 30, 2016,1 the bankruptcy court for the Southern District of Florida (the “Court”) addressed the debtor’s counsel’s interim application for an award of fees and expenses for services rendered to the debtor and its bankruptcy estate, as well as a secured creditor’s objections to the same.2 The debtor’s counsel sought to apply a pre-petition retainer held in her firm’s trust account in payment of her fees and expenses.3 The debtor’s lender raised no objection to the amount of the request, but objected to the payment of any court-approved compensation using the retainer on the grounds that the retainer represented the bank’s cash collateral in which the bank maintained a superior interest.4 Therefore, the bank argued, it was entitled to adequate protection for the use of its funds.5

The Court quickly identified the flaws in the lender’s arguments, noting that more than 5,000 new chapter 11 cases are filed each year; in nearly every one, the debtor’s counsel receives a retainer prior to filing the petition for services to be rendered in the case; and bankruptcy cases often involve at least one secured creditor claiming a security interest in all of the debtor’s assets, including deposit accounts and cash.6 The Court asked, “Why, then, is it so difficult to find a reported decision where a secured creditor objected to the use of a pre-petition retainer for payment of approved fees and expenses of the debtor’s counsel on the grounds that the retainer is the secured creditor’s cash collateral?”7

Download the full article, “Burr Alert: Court Rejects Lender’s Objection to Payment of Debtor’s Counsel’s Fees and Expenses from Pre-Petition Retainer.”

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