It may be considered an abuse. I suggest you try arbitration to resolve your fee dispute.
-Michael R. Juarez Law Office of Juarez and Schaeffer PO Box 16216 San Diego, CA 92105 (619) 804-4327 www.jslaw.org Mike@jslaw.org This posting is provided for “information purposes” only and should not be relied upon as "legal advice." Nothing transmitted from this posting constitutes the establishment of an attorney-client relationship. Applicability of the legal principles discussed here may differ substantially in individual situations or in different jurisdictions.
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.
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
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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
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If you can fully exempt the settlement money than you can keep the exempt settlement money. If your attorney does not have a lien he is an unsecured creditor just like all of your other unsecured creditors. Hire a bankruptcy attorney to do exemption planning before you file.
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.
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Talk to a bankruptcy attorney.
Mr. Crosner is licensed to practice law in California and has been practicing law in California since 1978. The response herein is general legal and business analysis.. It is not intended nor construed to be "legal advice" but rather it is analysis, and different lawyers may analyze this matter differently, especially if there are additional facts not reflected in the question. Oftentimes the question does not include significant and important facts and timelines that, if known, could significantly change the reply and make it unsuitable. I am not your attorney until retained by a written retainer agreement signed by both of us. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.
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.
The comments made here are meant to direct you to receive local consultation from an attorney in your area and ask proper, detailed questions to get the best legal advice upon which you can take appropriate action.