Debtor Attorney Fees from Workers Comp Claim?
Below is a question about debtor attorney fees from a pending workers comp claim from one of our readers. Please share your insights and experiences!
As a fairly experienced workers’ comp. attorney and a relative "newbie" as a bankruptcy practitioner (2 years), I have a question regarding debtor attorney fees. Obviously aware of Bethea and related decisions on the issue, would the courts be receptive to a fee agreement allowing debtor attorney fees to be paid out of a client’s future workers’ compensation settlement, assuming the client has an open w/c claim at the time of the Petition being filed? Such an agreement would also include language waiving the attorney fee lien for the debtor if attorney is unable to achieve a settlement in the w/c claim. Essentially, the attorney would maintain a lien on exempt proceeds.
Mr. Hesser:
As you are aware, Florida is an opt out state for Federal Exemptions. Florida Law provides that proceeds of a WC settlement are 100% exempt (section 440.22). So, you should properly disclose the asset on schedule B and claim the exemption under Florida Law as 100% exempt. Your attorneys fees should not be affected one way or another. I am not familiar with your local practice, so I would recommend consulting with the trustee and the court to determine whether you need to bring a motion to have the estate employ you on its behalf to prosecute the claim, even though the asset is exempt. Make sure to properly disclose to your client the conflict of interest and have him sign a waiver since you are now both a creditor and his attorney. I would also prepare a reaffirmation agreement and bring a motion before the court to approve the reaffirmation agreement. Require the client to appear at that motion so the judge can address the client as to the impact of reaffirmation. The other option is to have the client sign a new retainer agreement, post-petition, at the same contingency fee you originally agreed upon to compensate you for your post-petition work. I hope this helps.
Mr. Hesser,
I agree with Kevin's previous post. However, does Florida law limit the ability of the claimant to assign or transfer future work comp benefits? Some states have anti-assignment provisions in state law. I would hate for you to go through all of the process in bankruptcy court only to find that the assignment is forbidden by state law.