What It Means to Split Your Chapter 7 Attorney Fees Before and After Filing Bankruptcy
When individuals consider filing for Chapter 7 bankruptcy, one of the first questions they ask is: “How will I pay my attorney?” Because most people seeking bankruptcy relief are already struggling financially, the structure of attorney’s fees is a critical issue.
Over the past several years, bankruptcy practitioners and courts across the country have examined the legality and ethics of bifurcated fee agreements—arrangements where part of the attorney’s fee is paid before the case is filed (prepetition) and the remainder is paid afterward (postpetition). While these agreements aim to increase access to justice, they are also closely scrutinized under the Bankruptcy Code and professional conduct rules.
This article explains how attorney’s fees work in Chapter 7 cases, the legal standards governing bifurcated agreements, key case law developments, ethical concerns, and why Chapter 13 fee structures are treated differently.
What Is a Bifurcated Attorney Fee Agreement?
A bifurcated fee agreement divides the attorney-client contract into two parts:
Prepetition agreement – covers work performed before filing the Chapter 7 petition.
Postpetition agreement – covers work performed after the case is filed, with fees paid over time.
Because prepetition debts are discharged when a Chapter 7 case is filed, attorneys cannot require a debtor to pay unpaid prepetition fees after filing. Bifurcation attempts to resolve this by moving some legal work into the postpetition period.
Legal Standards for Bifurcated Fee Agreements in Chapter 7
Bifurcated agreements can be permissible—but only if strict conditions are met. In In re Milner, 612 B.R. 415 (2019), the court held that bifurcation is acceptable when:
The arrangement is in the client’s best interest
The attorney provides full disclosures, options, and explanations
The client gives informed written consent
Fees are reasonable and necessary
Courts, however, emphasize that these agreements must not undermine the debtor’s “fresh start,” a fundamental principle of bankruptcy law. As In re Prophet, 651 B.R. 263 (2022) warns, bifurcation “may not always yield beneficial results” and can deprive debtors of the protections intended by Chapter 7. Meaning, a split in attorney’s fees before filing a chapter 7 and after filing a chapter 7 could be an increased chance of you not getting a fresh start, and Bankruptcy Courts could view this as being predatory against the person who needs a fresh start.
Ethical Concerns and Violations: Lessons from In re Baldwin
Courts have sanctioned attorneys when bifurcated arrangements cross ethical or legal lines.
In In re Baldwin, 640 B.R. 104 (2021), the court found the attorney’s bifurcated arrangement improper because:
It created nondischargeable postpetition debts
Terms were insufficiently disclosed
A third-party lender was used, resulting in improper fee splitting
Attorneys charged exorbitant fees compared to standard flat-fee Chapter 7 cases
The court held that the arrangement violated multiple provisions of the Bankruptcy Code, local rules, and the Rules of Professional Conduct.
This case is frequently cited as a warning about the risks of poorly structured bifurcated fee agreements.
Recent Case Law and Judicial Trends
Judicial scrutiny of bifurcated agreements continues to evolve:
In re Milner—one of the more favorable bifurcation cases—was affirmed in part, vacated in part, and remanded in 2024, signaling growing caution among courts.
Courts nationwide have ordered disgorgement of attorney fees when disclosures were inadequate or fee-splitting arrangements were hidden.
Bankruptcy judges in some jurisdictions have issued local guidance, noting that bifurcated agreements should be used only as a last resort.
The U.S. Trustee Program has stated it will not challenge bifurcated agreements if they are reasonable, fully disclosed, and compliant with the Code.
While some courts cautiously approve bifurcation under strict conditions, others have found it unethical or impermissible—especially when it results in inflated fees or nondischargeable debts.
Why Chapter 13 Has a Different Fee Structure
Unlike Chapter 7, Chapter 13 bankruptcy is specifically designed to allow attorney’s fees to be paid after the case is filed.
That’s because Chapter 13 involves:
A 3–5 year court-approved repayment plan
A trustee who pays attorney’s fees as part of the plan
Statutory provisions permitting postpetition compensation
Therefore, paying attorney’s fees over time in Chapter 13 is explicitly authorized and not considered problematic.
In contrast, Chapter 7 does not allow unpaid prepetition fees to survive the bankruptcy, making bifurcation far more sensitive.
Bifurcated Fees and the Risk of Sanctions
Courts regularly sanction attorneys for:
Failure to disclose prepetition and postpetition fee agreements
Misrepresenting the nature of services performed pre- vs post-petition
Charging unreasonable mark-ups for installment plans
Using third-party “factoring” companies without full transparency
Under Bankruptcy Rule 2016(b), nondisclosure can lead to:
Disgorgement of some or all fees
Sanctions
Ethical violations under state rules
Several cases illustrate courts rejecting bifurcated fees when they appear to prioritize attorney profits over client protection.
Policy Considerations: Access to Justice vs. Consumer Protection
Courts recognize that bifurcation may help debtors who cannot afford the full Chapter 7 fee upfront. But they also warn:
It must not result in higher total fees than a standard Chapter 7
Debtors must receive unbiased, full disclosure of all options, including standard fee arrangements
Attorneys cannot shift essential prepetition work into a postpetition contract just to make fees collectible
The overarching theme from courts is clear: debtor protection comes first.
Conclusion
Bifurcated attorney’s fee agreements in Chapter 7 bankruptcy are not inherently illegal, but they are subject to strict requirements under:
11 U.S.C. § 329
11 U.S.C. § 528
Bankruptcy Rule 2016(b)
State ethical rules
Local bankruptcy court rules
When improperly executed, courts have ruled these agreements unethical, excessively costly, and even void, often ordering attorneys to return fees.
For consumers considering bankruptcy, it is essential to work with an attorney who:
Provides complete transparency
Explains all fee options
Prioritizes the debtor’s best interests
Complies with all federal and local rules
Properly structured, fee arrangements can help provide access to bankruptcy relief. But improperly structured, they can jeopardize the debtor's fresh start.
If you have questions about Chapter 7 attorney’s fees or whether a bifurcated agreement is appropriate in your situation, our office is here to help you navigate your options safely and ethically.