Conflict of Interest??

[rimi2001]

In Louisiana, it is ok for a Trustee to hire themselves as an attorney in the same case (if they are an attorney of course). This would seem to me to be a conflict of interest. How is this fair?

We call our Trustee to ask a question and they tell us as long as we call to ask a question or if they need to write a letter, ect. , fees and expenses will still be added until case closed.

[JollyGG]

It is how it usually works. Our trustee hired herself to go go after and distribute assests. I've seen other cases where this happened as well. It seems to be one way that trustee's get compensated for their time working on your case.

[yoyoma51]

Yes. That is part of the trustee's job.

Trustees receive 25% of what ever they seize. It is a very profitable part-time job.

Oh, and trustees do not have to be attorneys. There is no such requirement.

In this thread is some basic information about trustees:

http://www.bkforum.com/showthread.php?t=20213

PLEASE NOTE: I am not a lawyer. Bankruptcy may or may not be a best scenario for you. It depends on your situation. You may assume my advice is totally useless (my wife does, and she’s probably right). Talk to an experienced bankruptcy attorney (or three) in your jurisdiction for legal advice.

[ameliabedilia]

From reading the post it sounds like the original poster is asking if it is a conflict for an attorney to be both the debtors attorney and the trustee. I could be misreading it.

[arkienurse]

In Louisiana, it is ok for a Trustee to hire themselves as an attorney in the same case (if they are an attorney of course). This would seem to me to be a conflict of interest. How is this fair?

We call our Trustee to ask a question and they tell us as long as we call to ask a question or if they need to write a letter, ect. , fees and expenses will still be added until case closed.

Are you saying they told you that everytime you call them with a question they will charge you money?? Man that sucks, and I have never heard of any trustee doing that. I know mine never did.

[yoyoma51]

I guess we need some clarification.

Are you asking if the trustee can also be the attorney representing you?

I do not believe they can do both jobs for the same filer.

[HHM]

Yeah, we need some clarification...

The "individual" who serves as trustee, cannot sit on both sides of the table in the SAME case (that is fairly obvious). The trustee cannot both be a trustee and the debtor's attorney in the same BK.

Many times trustees are also attorneys, as a result, when it comes time for the trustee to hire an attorney, they will hire themselves (or their firm). There is no conflict of interest here. The trustee represents the CREDITORS, collectively. So if the trustee needs an attorney, it is to enhance the estate for the creditors, hence, no conflict of interest.

I think what might be happening with the fees etc, is if the Trustee has hired himself as the attorney for the trustee in this particular case, that Attorney charges the trustee (and the trustee in turn, charges the BK estate) all incurred legal fees. So, if the debtor calls the attorney, thereby incurring legal fees against the BK estate. However, "usually" the debtor is not directly responsible for those fees, the BK estate is responsible for those fees.

[rimi2001]

I understand what you are writing HHM. But this Trustee (will call her Trustee, because the phone number I had from day 1 for our Trustee's office has never changed and she answers the phone when I call it) was nasty and told me that everytime I call or ask a question of if we need anything from her, we will incur fees. This is where I think this is a conflict of interest and it totally taking advantage of the situation here. So basically, she is telling us that she is no longer our Trustee, but 100% an attorney at this point.

[FreshLikeADaisy]

Rimi, this is just me and I'm no attorney, but I can't see how you personally would be required to pay anything beyond filing fees and surrendering non-exempt assets in a Chapter 7, regardless of what this individual told you. Period. They get paid out of the bankruptcy estate, and Chapter 7 trustees (I think) also get something from the court because many of their cases are no asset, which would otherwise mean that they would work for free in those cases.

If you have an atty, I wouldn't worry about it; the trustee might just be pissy because you're technically not supposed to call them directly (though you can). If you are filing pro se, and therefore have every right to call the trustee directly, you might want to consider calling back and asking her to send you the fee schedule in writing, and see if that doesn't get it straightened out. Technically speaking, according to the Professional Rules of Conduct that attorneys are supposed to abide by, their fees are supposed to be spelled out in writing and clarified prior to the incurring of those fees. You have not entered into a professional relationship with this woman, signed any agreement, or paid her a retainer, so you really do have every right to ask that her fees be provided to you in writing and to spell out to whom they will be charged (you, or the bk estate).

Don't do this if you have an attorney, only if you are pro se, and be polite and sincere about it when you do. I'm not suggesting you do it to light a fire under her (though it may have a similar effect), only to gain clarification. Good luck!!!

[FreshLikeADaisy]

Here's the law on it:


(a) In a case under chapter 7 or 11, the court may allow reasonable compensation under section 330 of this title of the trustee for the trustee’s services, payable after the trustee renders such services, not to exceed 25 percent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable compensation not to exceed 3 percent of such moneys in excess of $1,000,000, upon all moneys disbursed or turned over in the case by the trustee to parties in interest, excluding the debtor, but including holders of secured claims.



(a)
(1) After notice to the parties in interest and the United States Trustee and a hearing, and subject to sections 326, 328, and 329, the court may award to a trustee, a consumer privacy ombudsman appointed under section 332, an examiner, an ombudsman appointed under section 333, or a professional person employed under section 327 or 1103—
(A) reasonable compensation for actual, necessary services rendered by the trustee, examiner, ombudsman, professional person, or attorney and by any paraprofessional person employed by any such person; and
(B) reimbursement for actual, necessary expenses.
(2) The court may, on its own motion or on the motion of the United States Trustee, the United States Trustee for the District or Region, the trustee for the estate, or any other party in interest, award compensation that is less than the amount of compensation that is requested.
(3) In determining the amount of reasonable compensation to be awarded to an examiner, trustee under chapter 11, or professional person, the court shall consider the nature, the extent, and the value of such services, taking into account all relevant factors, including—
(A) the time spent on such services;
(B) the rates charged for such services;
(C) whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title;
(D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed;
(E) with respect to a professional person, whether the person is board certified or otherwise has demonstrated skill and experience in the bankruptcy field; and
(F) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title.
(4)
(A) Except as provided in subparagraph (B), the court shall not allow compensation for—
(i) unnecessary duplication of services; or
(ii) services that were not—
(I) reasonably likely to benefit the debtor’s estate; or
(II) necessary to the administration of the case.
(B) In a chapter 12 or chapter 13 case in which the debtor is an individual, the court may allow reasonable compensation to the debtor’s attorney for representing the interests of the debtor in connection with the bankruptcy case based on a consideration of the benefit and necessity of such services to the debtor and the other factors set forth in this section.
(5) The court shall reduce the amount of compensation awarded under this section by the amount of any interim compensation awarded under section 331, and, if the amount of such interim compensation exceeds the amount of compensation awarded under this section, may order the return of the excess to the estate.
(6) Any compensation awarded for the preparation of a fee application shall be based on the level and skill reasonably required to prepare the application.
(7) In determining the amount of reasonable compensation to be awarded to a trustee, the court shall treat such compensation as a commission, based on section 326.


(b)
(1) There shall be paid from the filing fee in a case under chapter 7 of this title $45 to the trustee serving in such case, after such trustee’s services are rendered.
(2) The Judicial Conference of the United States—
(A) shall prescribe additional fees of the same kind as prescribed under section 1914 (b) of title 28; and
(B) may prescribe notice of appearance fees and fees charged against distributions in cases under this title;
to pay $15 to trustees serving in cases after such trustees’ services are rendered. Beginning 1 year after the date of the enactment of the Bankruptcy Reform Act of 1994, such $15 shall be paid in addition to the amount paid under paragraph (1).
(c) Unless the court orders otherwise, in a case under chapter 12 or 13 of this title the compensation paid to the trustee serving in the case shall not be less than $5 per month from any distribution under the plan during the administration of the plan.
(d) In a case in which the United States trustee serves as trustee, the compensation of the trustee under this section shall be paid to the clerk of the bankruptcy court and deposited by the clerk into the United States Trustee System Fund established by section 589a of title 28.

Here's the link to section 330; the formatting may be easier to read there:

http://www4.law.cornell.edu/uscode/html/uscode11//usc_sec_11_00000330----000-.html

But it's easy to see that yes, there are limits to what your trustee can charge, and to whom she may charge them. And in the end, she will have to justify them. So don't worry too much about it. Call if you're pro se and don't let her discourage you from that, but leave it alone if you have an atty and just never call her again but rather go through the atty. Good luck!!!

[rimi2001]

Thanks freshlikeadaisy for all of the info. We did file prose and that is what brought up all the frustrations and questions. I will read everything you sent. She is the Trustee and hired herself as the Attorney- and that is where the fees are in question.

[HHM]

Bottom line, you, the debtor, will NOT have to pay the trustee's attorney's fees out of pocket.

[FreshLikeADaisy]

Rimi, HHM is right. I admire your courage and gutsiness to go pro se. I am pro se as well, and have gone through the 341, just waiting for the discharge. So fingers crossed for both of us, eh?

I forgot to add: you can avoid speaking with your trustee altogether and send her a certified letter, if that sits easier with you. It will also be much harder for her to play whatever game she's trying to play with you, if you keep your communications to writing. I probably don't have to tell you this, but whatever you put in writing should be brief, concise, clear, unemotional, and professionally written. That brevity and crispness of communication in and of itself tends to cut all that pissy BS short, actually. She may have felt that you were asking her for legal advice (which by law she cannot give) but instead of a straight answer she threatened fees. Of course, she may just be pissy because she has to answer her own phone.

In the end, if you have significant problems with her, she is ultimately responsible to the DOJ and to you to behave in a professionally appropriate manner. Though extremely rare, I was reading where you can actually request a different trustee than the one you were assigned, also known as the default trustee. I was reading this on the USDOJ Trustee Program website (if I remember correctly; I will try to look it up again for you) and they were saying only 250 or so of filers did this in a given year, and pointed to that very low number as proof of the success of the trustee program. So if it got really bad, you could look into that...

But in the end, I don't care if she's rude like Leona Helmsley as long as she gives me my bk, know what I mean?

Check out this link; there was another thread where a guy's attorney's assistant was threatening to charge similar "fees", and I did a little legwork on that. It's a little different than your situation, this was not his trustee, but the lack of basis for those fees is pretty much the same:

http://www.bkforum.com/showthread.php?t=19855

Good luck!!! I wish you all the best!!!

[FreshLikeADaisy]

Hrm, I'm still looking for where I read that, about requesting a change of trustee.

In the meantime, Title 11, section 324, says:



(a) The court, after notice and a hearing, may remove a trustee, other than the United States trustee, or an examiner, for cause.

(b) Whenever the court removes a trustee or examiner under subsection (a) in a case under this title, such trustee or examiner shall thereby be removed in all other cases under this title in which such trustee or examiner is then serving unless the court orders otherwise.

So at the very least, you can have a trustee removed for cause, although I *surely* would NOT want to be the one who test drove that case...

Still looking for that other reference. If I can't find it I may have to withdraw my statement.