Making a Request for Counsel When Filing Bankruptcy

A bankruptcy proceeding puts a debtor's assets under the trustee's management. This means that the debtor cannot just use money for payments that are out of the ordinary course of business. This is why the debtor should ask and get permission from the bankruptcy court whenever professionals are hired. The hiring of counsel for the bankruptcy proceeding can be done before the actual filing but the retention should be documented. The debtor can choose to hire the same lawyer for the bankruptcy proceeding or choose someone who has the experience.

Motion

During the filing of the bankruptcy petition, a motion for the retention of counsel will also be submitted. This is necessary in order to let the court know who is handling the case and so as not to violate protocols. The petition for the hiring of the counsel will include the type of services that the lawyer is expected to do during the duration of the case, which includes helping the debtor come up with a plan of liquidation or reorganization. The motion will also report counsel’s hourly fees for rendering services to the debtor. Counsel can even help the debtor draft a reorganization or liquidation plan that will be passed along with the petition. This is called pre-packaged bankruptcy proceeding. The creditors know in advance the terms of the plan, moving the process faster toward its conclusion.

Approval

The motion or request for the hiring of bankruptcy counsel should pass the disinterestedness test prescribed under Section 327(a) of the U.S. Bankruptcy Code. This section requires lawyers not to hold adverse or conflicting interests in the case. For instance, if a law firm represents the debtor, its representative or even the firm itself should not be representing one of the creditors. Doing so will put the law firm in the middle, making it choose which side to take part of. In order to avoid negative results arising from conflicts of interest, lawyers are only to represent the debtor and none of the other parties involved in the case. The approval will also depend on the resolution of objections against the lawyer’s retention.

Consult a Lawyer

Talk to a bankruptcy lawyer before filing the case and discuss the disinterestedness clause of the bankruptcy code. The bankruptcy lawyer can also help you with any objections that may arise in accordance to the hiring of a professional.