Question about paying a lawyer prior to BK filing>>>

[trader19]

Guys,

I am filing for C7 in about a month. However, I also have an ongoing issue with the SEC. I need to continue to pay my SEC lawyer for him to do work on my case. The payments are in the thousands of dollars. What will happen when I file? Will they try to get this money from him? I need to pay him to do work on this case. How are my payments to this lawyer (as well as my BK lawyer) treated?

Thanks!

[LadyInTheRed]

Under 11 USC § 547(c), A trustee cannot avoid as a preference either of the following transfers:

(1) to the extent that such transfer was—
(A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor; and
(B) in fact a substantially contemporaneous exchange;

(2) to the extent that such transfer was in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee, and such transfer was—
(A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or
(B) made according to ordinary business terms;

http://www.law.cornell.edu/uscode/text/11/547

The payment to your BK attorney falls under subargraph (1). If it didn't, nobody would be able to hire a BK attorney.

I suspect the payment to your SEC attorney falls under subpargraph (2). Check with your BK attorney to be certain.

[despritfreya]

Payments to your bk attny are considered contemporaneous and, unless they are unreasonable, will not be recoverable by the Trustee.

If you are paying the SEC attny in the "ordinary course", not on an old bill, then the payment is not a preference.

If you are giving your SEC attny a "replacement retainer", to the extent the amount he is holding has not been earned as of the day you file bk, the Trustee has the right to demand turnover. This is problematic as, no doubt you will need his services post filing.

To the extent you are paying the SEC attny for an antecedent obligation (past due bill) and the amount is in excess of $5,080** for the 90 days prior to filing it is a preference and the Trustee can recover it. This is also problematic.

Regardless, the payment must be disclosed and it will be up to the Trustee and the SEC attny to argue over it.

** I listed the preference amount at $5,080 as I suspect you are a "non-consumer" filer. If you are a consumer filer the amount is reduced to $600 within that 90 day window.


Des.

[justbroke]

You guys are too fast! Des, you are too good.

[LadyInTheRed]

Check with your BK attorney to be certain.

Or ask despritfreya, who is too good indeed.

[df04527]

Amen LITR! Can't agree more!