What Is Section 329?
Section 329 imposes two requirements on attorneys representing debtors:
- Disclosure: File a statement of all compensation paid or agreed (Rule 2016(b))
- Reasonableness review: The court may examine and order disgorgement of any excess
11 U.S.C. Section 329(a): "Any attorney representing a debtor... shall file with the court a statement of the compensation paid or agreed to be paid, if such payment or agreement was made after one year before the date of the filing of the petition..."
The Disclosure Requirement
Under Rule 2016(b), every debtor's attorney must disclose within 14 days after the order for relief:
- Whether compensation has been shared with any other entity
- Terms of compensation agreements
- All payments received within one year before filing
- Source of all payments
Failure to disclose is punished severely. Courts have ordered complete disgorgement even when fees were otherwise reasonable.
The Reasonableness Standard
- Time and labor required
- Novelty and difficulty of legal questions
- Skill required
- Customary local fees
- Amount at stake and results obtained
- Attorney experience and reputation
How Disgorgement Works
Under 329(b), the court can cancel fee agreements or order return of excessive payments -- to the estate or to the entity that paid.
The U.S. Trustee actively monitors fee applications in many districts.
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Related Resources
bankruptcymalpractice.org -- Attorney malpractice guide
prosedebtors.org -- Filing without an attorney
howtofilebankruptcy.org -- Step-by-step filing guide