Chicago, You Have a Problem With Bankruptcy Lawyers

Everybody knows that lawyers never lose — even in cases they lose — since they get paid.

Obviously, that’s a generalization because every lawyer knows that clients also stiff them. There’s another difficulty in Chicago’s bankruptcy court, however.

At the Northern District of Illinois, lawyer’s fees routinely happen to be paid first among lenders throughout so-called”step-up” payment programs. It’s become a problem, and now some lawyers are obtaining a courthouse haircut.

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The controversy started last year when a bankruptcy trustee filed objections to lawyer’s fees in several scenarios. The trustee said the lawyers'”step-up” clinic, which prioritizes obligations to creditors, was self-serving.

In 1 instance, a woman had filed for bankruptcy twice to shed her debt. The plan permitted her to release all that, except to her lawyers. They were paid in full — both times.

Insteadthey sanctioned certain attorneys and made them refile for payment of their fees.

“There just isn’t any means of knowing the amount of debtors have been harmed by a policy driven by the counsel they trusted and relied upon to represent their best interests,” wrote Judge LaShonda Hunt.

It’s a high-volume court, where judges are now telling attorneys to slow down.

At the warmth of the”step-up” controversy, judges are scrutinizing and cutting attorney charges. The Semrad Law Company, that can be known as Debtstoppers, for example, saw its fees reduced in four dozen instances.

It’s part of a larger issue, according to reports.

In Chicago, that is often because the attorneys have been receiving paid first. And one way or the other, the customers shed.