Hearn v. Persels & Associates

Nov 04, 2011

OUTCOME: Discharge

Debtor enrolled in the Debt Repayment Plan (DRP) in April 2009. In July 2010, he fired defendant. His Chapter 7 disclosed that he had paid defendant $7776 and that he possessed a possible consumer righ ... ts claim against defendant. The trustee, per 11 U.S.C.S. § 554, later abandoned claims against defendant, and debtor won a discharge. When debtor filed the within adversary, defendant sought dismissal for lack of subject matter jurisdiction on claims that the trustee’s abandonment of the claim meant that the case was no longer a matter that concerned estate administration per 28 U.S.C.S. § 157(b)(2). The court denied dismissal. It held that neither § 329 nor Rule 2017 prohibited it from ordering disgorgement of fees paid from non-exempt funds and that § 329 expressly contemplated that such funds could be recovered to benefit the payor--here, debtor--rather than the estate. Nor did the closure of the case strip the court of jurisdiction. Given that debtor expended the funds to enroll in a DRP, one purpose of which was to avoid a bankruptcy filing, the propriety of the compensation was properly scrutinized under § 329 and Rule 2017, with defendant bearing the burden to prove that the amount was reasonable.