What Is Section 329?
Section 329 of the Bankruptcy Code governs attorney compensation in bankruptcy cases. It requires attorneys to disclose all fees received or to be received, and gives courts the power to order disgorgement -- the return of fees -- if compensation exceeds the reasonable value of services.
Section 329(a) -- Disclosure
Within 14 days of the petition, the attorney must file a statement disclosing all compensation paid or agreed to be paid for services rendered in connection with the case. This includes retainer fees, flat fees, hourly fees, and any other form of compensation. Failure to disclose creates a presumption that fees are excessive.
Section 329(b) -- Court Power
If the court finds that compensation exceeds the reasonable value of services, it can cancel the fee agreement entirely, order the return of any payment already made, or reduce the fee to a reasonable amount. The court has broad discretion and can act on its own motion or at the request of any party, including the debtor, trustee, or United States Trustee.
What Courts Consider
Complexity of the case. Time and labor required. Results obtained. Comparable fees charged by other attorneys in the district. Whether the services were actually performed. Quality of representation. Whether the attorney disclosed all compensation as required. The debtor's ability to pay.
How to Request Disgorgement
File a motion under Section 329(b) with the bankruptcy court. Include the fee agreement, any billing records, a timeline showing what work was and was not performed, and the court-approved fee amount (if any). The United States Trustee can also request fee review under Section 329. Related: Bankruptcy Malpractice Guide.
Connection to Rule 2016 and 2017
Bankruptcy Rule 2016 requires attorneys to file fee applications. Rule 2017 governs examination of the debtor's transactions with attorneys, including all payments made within one year before filing. These rules work together with Section 329 to ensure transparency in attorney compensation.
Learn more about attorney accountability
Malpractice Guide