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Bankruptcy Attorneys Are Allowed To Be Paid Out of Disposable Monthly Income (DMI) in a Chapter 13 Bankruptcy Case

June 23, 2014 by  
Filed under Blog

Bankruptcy attorneys are allowed to be paid out of Disposable Monthly Income (DMI) in a Chapter 13 bankruptcy case. Courts have generally held that the term “ unsecured creditor” is a catch all term designed to address creditors not referenced elsewhere by Congress in allowing debtors to deduct certain payments to unsecured creditors. Since bankruptcy attorney fees are not included in form B22C, they are allowed to be paid out of the debtor’s disposable monthly income. In re Puetz, 370 B.R. 386, 391 (Bankr. D. Kan. 2007); In re Smith, 09-64409, 2012 WL 6553786 (Bankr. N.D. Ohio Dec. 14, 2012); In re Echeman, 378 B.R. 177 (Bankr. S.D. Ohio 2007).

Further, the Advisory Committee Notes to Official Form B22C agree, noting,

“The Chapter 13 form does not provide a deduction from disposable income for the Chapter 13 debtor’s anticipated attorney fees. There is no specific statutory allowance for such a deduction, and none appears necessary. Section 1325(b)(1)(B) requires that disposable income contributed to a Chapter 13 plan be used to pay ‘unsecured creditors.’ A debtor’s attorney who has not taken a security interest in the debtor’s property is an unsecured creditor who may be paid from disposable income.” In re Puetz, 370 B.R. 386, 391 (Bankr. D. Kan. 2007) (citing Official Bankruptcy Form 22 advisory committee note ¶ D.3).

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