Are You Entitled To A Refund Of Your Legal Fees Paid If You Change Your Mind About Filing Bankruptcy?

Sometimes people hire an attorney to file bankruptcy and then change their mind about filing. In some cases, the debtor works things out with his creditors; some prospective debtors receive family assistance to pay their bills, and other debtors just feel bad about filing bankruptcy. In many such cases, the client in financial difficulty expects their bankruptcy attorney to refund fees paid previously to start the bankruptcy process. I saw an interesting blog post on this question by California bankruptcy attorney, Michael Doan, of San Diego California. Michael said that California law makes it difficult to recover fees already paid to a bankruptcy attorney if you change your mind about filing.. I did some research about fee recovery from Florida attorneys.

Whether your bankruptcy attorney is supposed to refund fees if you change your mind about filing depends on the terms of the written fee agreement between you and your Florida lawyer. If your initial payment to your attorney is payable to your attorney’s trust account to cover future fees to the extent earned then you are probably entitled to a refund if your attorney has not done any work on your case. However, if your initial payment to your bankruptcy lawyer is a "retainer" then your payment is not refundable even if they attorney has done no work to prepare your bankruptcy petition. The Florida Bar rules of professional conduct state, in part, that "Retainers are funds paid to guarantee the future availability of the lawyer's legal services and are earned by the lawyer upon receipt. Retainers, being funds of the lawyer, may not be placed in the client's trust account." Because the Bar considers "retainers" earned when paid they are not subject to refund.

Also, if your fee agreement does not characterize the initial payment as a "retainer" but expressly states otherwise that all fees paid to the lawyer are "earned" when received, the fees are not held in trust and probably are not refundable.

If you are hiring attorney to file bankruptcy but think you could change your mind before filing ask your attorney what happens to fees paid if you don’t go through with bankruptcy. Ask your bankruptcy lawyer if any part of fees advanced for bankruptcy will be held in the lawyer’s trust account where they might be refundable if you do not file. Know that if your attorney asks you for "a retainer" then you are not entitled to that money if you change your mind about bankruptcy. Notwithstanding the Florida Bar guidelines I find that many attorneys will refund part of "retainers" or "fees earned" if they perform little or no work in preparation of a bankruptcy petition. Fair treatment of clients is always good business which pays off for the attorney over time.

posted by Jonathan Alper, bankruptcy and asset protection lawyer, Orlando, Florida