I have a settlement in principle in place for a large sum that is necessary for my future support. I owe my attorney for his services but have a dispute as to what I owe and he has no lien in his agreement with me. All the medical bills and conceivable attorneys fees I would owe would not exceed the amount I anticipate getting in the settlement. I have no job. If I file bk will it be considered in bad faith or an abuse?
Should someone be unlucky enough to get into an accident but then lucky enough to hire the right attorney - an attorney who successfully gets that someone "a large personal injury settlement," then that certain someone should be thanking his or her attorney and telling everyone he or she knows how great that attorney is... and not asking other attorneys how to avoid paying the successful attorney.
That said, when one has the cash from "a large personal injury settlement," it probably precludes that person from filing bankruptcy. Bankruptcy is a legal tool for people with no money, not people sitting on a "a large personal injury settlement."
Paul J. Molinaro, M.D., J.D.
Attorney at Law, Physician, Broker
Fransen & Molinaro, LLP
4160 Temescal Canyon Road, Suite 306
Corona, CA 92833
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The bankruptcy would not be considered bad faith or an abuse, but you will incur additional fees by having a bankruptcy Trustee pay your debts, and, if he keeps your current attorney, the Trustee would decide how much to pay him and how much your case should settle for. Talk to an experienced bankruptcy attorney before you try this. I don't see how it would help you.
This sounds like a law school exam question to me. Whether or not your attorney has a lien (he probably does, despite your protestations to the contrary) seems immaterial. Your attorney is entitled to the contractual percentage or reasonable compensation either from your bankruptcy estate or from you personally. A bankruptcy proceeding may be able to reduce your attorney’s overall fee, although fee arbitration or a civil lawsuit would accomplish the same result.
You do not specify the type of proceeding you are contemplating, although I assume it would be a Chapter 7. A "large sum" would not be exempt and any amount above the exempt amount would go to your creditors, including your attorney and medical providers. For more information about settlements in the bankruptcy context, see my blog post: Inheritance and Bankruptcy
I doubt highly that your attorney does not have a "lien." If you signed a retainer agreement, the fee payment will be spelled out in the agreement. Even if he didnt, he would have a right to recover for the reasonable value of services so you will owe him/her whether you want to or not.
Having said this, I think you are treading on dangerous water here and could actually lose your whole settlement. While I don't practice BK law, and certainly encourage you to consult a BK lawyer, my experience has been that if you file a Chapt. 7 (complete liquidation) when you have assets (the settlement) you can be assured that the attorney or someone else on his behalf will file a motion to try to convert a Chapt 7 to a 13 and force you to pay, even at a reduced rate.
Bottom line is if the attorney helped you get that settlement, he/she is entitled to be paid for their efforts. It is not fair that you would even consider stiffing the attorney because you want to keep all of the money. If the amount is not that much, you can try to work it out with him/her or, go to fee arbitration which is usually required before you pursue formal action. Stiffing the lawyer is not the way to go and I can assure you that your money will sit in his trust account longer than you can imagine if you take the approach you are contemplating.
Most personal injury retainers include language that they have a lien for fees against any recovery. In addition, your settlement check will contain your signature AND the attorney's, so that you sign first, the attorney signs second and puts the funds in his/her trust account. When cleared by the bank, the attorney will simply distribute the funds per the agreement, paying all statutory liens and costs and the agreed upon attorneys fees. You will get what's left. There is a fee arbitration procedure in the county level that will allow you to challenge the fees, but don';t expect to win simply by saying you want to keep more money. Finally, a bankruptcy can be filed, but your recovery simply then becomes an asset (less allowable exemption) of the bankruptcy for a trustee to distribute. It is doubtful that a trustee would ignore the attorneys right to the agreed upon fee, when the funds obtained were for your benefit, as well as the medical and insurance carrier benefit. Consult a bankruptcy attorney.
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