UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
MARK ALLEN HALLER
PATRICIA ALENE HALLER
DEBTORS CASE NO. 09-21693
MEMORANDUM OPINION AND ORDER
This matter is before the court on a Motion for an Order to Disgorge Excessive Fees filed by the United States Trustee (“UST”). Counsel for the Debtors, Alexander F. Edmondson (“Edmondson”), has disclosed that he agreed to accept and received $11,150.00 as compensation for representing the Debtors in this case. The UST maintains that this amount is excessive. Edmondson filed a Response to the United States Trustee Regarding Attorney Fees and Counsel’s Request to Hold This Matter in Abeyance Until Completion of the Case Administration (“the Response”). The matter was heard on August 18, 2009, and Edmondson was directed to file his time sheets within seven days. The UST was given ten days following the filing of time sheets to respond. Edmondson filed his time sheets, and the UST filed his Response to Attorney’s Time Sheets Detailing Legal Services Rendered on Behalf of Debtors. The matter is now ripe for decision.
The Debtors filed their Chapter 7 petition in this court on July 7, 2009. The Disclosure of Compensation of Attorney for Debtor(s) (“the Disclosure”) indicates that Edmondson agreed to accept $11,150.00 as his fee for legal services. Under paragraph 5(d) of the Disclosure, Edmondson stated that he would engage in the following:
Negotiations with secured creditors to reduce to market value; exemption planning; preparation and filing of reaffirmation agreements and applications as needed; preparation and filing of motions pursuant to 11 USC 522(f)(2)(A) for avoidance of liens on household goods.
Paragraph 6 of the Disclosure states that the fee does not include: “Representation of the debtors in any dischargeability actions, judicial lien avoidances, relief from stay actions or any other adversary proceeding.” Further, the Debtors’ Statement of Financial Affairs at question 9, Payments related to debt counseling or bankruptcy, provides:
Clients gave as consideration for Bankruptcy fee the following items of value: 1) 1994 Harley Sportster 12K - trade in value credited $7,500.00 with a true fair market value of approx. $4,000.00 2)$3000.00 cash received on July 6, 2009 3) Two pewter pitchers valued at $250.00 4) Two WWII flags valued at approximately $400.00 Total value of consideration given is $11,150.00
Edmondson filed his time sheets in regard to services provided to the Debtors. The first entry is dated May 2, 2009; the last entry is dated August 24, 2009. Total hours for that period were 29.5, of which 16 hours were accumulated pre-petition, billed at $200.00 per hour. The “Total Value of Items Received” is represented to be $7,650.00, rather than $11,150.00. Edmondson also shows another ten anticipated hours to be expended, also at the rate of $200.00 per hour, for another $2,000.00 to be charged, and a total fee of $9,650.00.
The court has authority to review compensation of an attorney representing the debtor pursuant to Bankruptcy Code section 329(b):
(b) If such compensation exceeds the reasonable value of any such services, the court may cancel any such agreement, or order the return of such payment, to the extent excessive, to–
(1) the estate, if the property transferred–
(A) would have been property of the estate;
11 U.S.C. §329(b)(1)(A). The court’s task here is to determine whether the compensation Edmondson has received exceeds the reasonable value of his services in this case. Edmondson contends that this case is complex, especially in regard to an unrecorded first mortgage on the Debtors’ primary residence, and the Debtor husband’s interest in his deceased father’s estate. Edmondson states that he spent 11.5 hours pre-petition reviewing mortgages and probate files, and otherwise looking into matters associated with the estate of the deceased. He contends that these pre-petition hours were part of his due diligence and preparation for the filing of this case. He further states that he agreed to a “flat fee” for representing the Debtors in all matters pertaining to their case, including adversary actions and any protracted case administration, to eliminate the uncertainty of the potential cost of the bankruptcy.
In considering the reasonableness of fees, the court looks to Bankruptcy Code section 330(a)(3), which provides:
(3) In determining the amount of reasonable compensation to be awarded to [a] . . . professional person, the court shall consider the nature, the extent, and the value of such services, taking into account all relevant factors, including–
(A) the time spent on such services;
(B) the rates charged for such services;
©) whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title;
(D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed;
(E) with respect to a professional person, whether the person is board certified or otherwise has demonstrated skill and experience in the bankruptcy field; and
(F) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title.
11 U.S.C. §330(a)(3)(A)-(F).
Review of the case thus far reveals that Edmondson has represented the Debtors through the filing of their petition and the first meeting of creditors, and has filed various motions involving stay relief and redemption, and objections to claims. These are the usual and customary tasks for which an attorney representing Chapter 7 debtors would be compensated. Activities which benefit the debtor personally rather than the estate, such as defense of a dischargeability action, are not compensable out of funds that would otherwise be considered estate assets. Challenging an unrecorded first mortgage on property of the Debtors is the province of the Chapter 7 Trustee.
Applying the factors set out above to the circumstances of this case, the court believes that $3,000.00 is a more than adequate fee for representation of the Debtors. It is therefore ordered and directed that Edmondson turn over to the Chapter 7 trustee any property and/or funds he has received which exceed that amount.
Alexander F. Edmondson, Esq.
John L. Daugherty, Esq.
Chapter 7 Trustee