Thursday, April 21, 2011



In re: Crowley (Smith v Crowley), ___ BR ___ (Bkrpcy ED Mich 2010)

Wife’s attorney fees obligation to her divorce lawyer is dischargeable in a Chapter 7 proceeding, where the fee agreement promised monthly statements, provided a mechanism for challenging amounts invoiced, and gave the attorney a lien against assets, including realty, wife owned or would be awarded. A second fee agreement was signed shortly before trial confirming the past due amount, erroneously reciting that monthly statements had been sent, promising payment for additional services, and also containing the lien on assets term, this time including a legal description for the marital home.

The divorce judgment awarded wife the home and obligated her to refinance within 90 days, obligated each to pay their own lawyer, except husband was to pay $20,000 toward wife’s fees, and discharging counsel. The attorney’s lien effectively prevented the required refinancing, leading to contempt charges against her. The bankruptcy court suggests that the state court prompted wife to challenge her attorney’s lien, which resulted in a state court decision that the lien was set aside, and liquidated the amount of the fees due. The attorney sought a bankruptcy court determination that his remaining fees be determined nondischargeable under 11 USC 523(a)(2)(A) and (B), although only (B) applies to the claim of non-dischargeability based on debtor’s written statement of her financial condition. The bankruptcy court found no fraud in debtor/wife’s state court action to remove the lien, since actionable fraud in this bankruptcy context needs to have occurred at the time of the writing. There was no evidence that wife did not intend to honor the lien at the time she signed the fee agreements.

Dailey intrenet new from Flint MI USA

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1 comment:

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Patricia Briggs
Content Editor