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Critical Ruling on Compensation from Supreme Court

By Luis Salazar
March 02, 2004

The Supreme Court has held that Bankruptcy Code Section 330(a)(1) does not allow a Chapter 7 debtor's attorney to be compensated from the estate unless the attorney is employed by the Trustee with the approval of the Bankruptcy Court. Lamie v. United States Trustee, 2000 WL 110846 (U.S. 2004). This decision conclusively ends the controversy over the 1994 amendments to that Section, and puts Chapter 7 debtors' counsel on notice that, if not retained pursuant to Section 327, they are on their own with respect to fees.

Background

Before the 1994 amendments, Bankruptcy Code Section 330(a) allowed a court to “award to a trustee, to an examiner, to a professional person employed under Section 327, or to the debtor's attorney … 1) reasonable compensation for … services rendered by such trustee, examiner, professional person, or attorney[.]” But the 1994 amendments altered Section 330(a) by deleting the above-highlighted “ or to the debtor's attorney.” This odd deletion ' which created an awkward grammatical structure and eliminated the neat parallelism that once marked the Section ' gave strong indications of being a scrivener's error.

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