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Routine Illegality in Bankruptcy Court Fee Practices

American Bankruptcy Law Journal, 2009

UCLA School of Law, Law-Econ Research Paper No. 09-10

55 Pages Posted: 7 May 2009  

Lynn M. LoPucki

University of California, Los Angeles (UCLA) - School of Law

Joseph W. Doherty

University of California, Los Angeles - School of Law

Date Written: May 6, 2009

Abstract

This Article reports the results of an empirical study showing that the United States bankruptcy courts routinely authorize and tolerate professional fee practices that violate the Bankruptcy Code and Rules. The study documents the existence of three such illegal practices. The Ordinary-Course-Professionals Practice excuses some or all professionals serving in the ordinary course of the debtor’s business from the requirement that they obtain court approval for the payment of their fees. The Prior-Payment-Disclosure Practice ignores the requirement that a final fee application disclose the prepetition payments the professional received in connection with the bankruptcy case. The Disburse-First Practice allows debtors to pay 80% or more of the fees sought by professionals before the court has even seen the fee requests. The Article speculates that these practices, which apparently occur only in large, public company cases, result at least in part from competition among the bankruptcy courts for those cases.

Keywords: bankruptcy, professional fees, attorneys fees, court competition

JEL Classification: K22, K41, K42, L84

Suggested Citation

LoPucki, Lynn M. and Doherty, Joseph W., Routine Illegality in Bankruptcy Court Fee Practices (May 6, 2009). American Bankruptcy Law Journal, 2009; UCLA School of Law, Law-Econ Research Paper No. 09-10. Available at SSRN: https://ssrn.com/abstract=1399728

Lynn M. LoPucki (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
(310) 794-5722 (Phone)

Joseph W. Doherty

University of California, Los Angeles - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States

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