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postpetition services only, under a prepetition contract, is permissible. Another circuit held that those who cannot pay in full prepetition can tender a small retainer for post-petition work, then hire and pay counsel for additional work postpetition. The newest circuit court decision follows Bethea on the point that debts for prepetition attorneys' fees are dischargeable but says that postpetition attorneys' fees are not dischargeable, with no analysis of fees being paid pursuant to a prepetition contract. Some courts also allow the reaffirmation of pre-petition attorney's fees when approved by the court, recognizing the attorney must make clear to the client the adversity in this regard. These circuit courts have not come to grips with the practical problems chapter 7 bankruptcy attorneys face. If the lawyer receives a prepetition retainer, it cannot be used for postpetition services unless requested by the trustee and approved by the court, and the unearned retainer balance on the petition date is property of the estate for the trustee to administer. If the debtor receives a loan postpetition to pay attorneys' fees, the loaned money is also property of the estate, that cannot be used for services only benefiting the debtor. If the attorney and client agree prepetition on retention that will continue on agreed terms postpetition, the contractual obligation is discharged, the attorney is stayed from enforcing it, and the court may not allow the lawyer to withdraw. The offer, acceptance and consideration must all be postpetition for the contract to be a postpetition contract, and the lawyer cannot ethically urge a new contract on a client already entitled to have the services performed for him. It will be difficult, at best, for the attorney to give unbiased advice to reaffirm the fee contract.
This outline is adapted from Chapter 27, Ethical Responsibilities, Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)
