to Get Paid in Chapter 11
BY BOBBY GUY, MEMBER, FROST BROWN TODD LLC
payment of professionals in Chapter 11 is a complex process intended to ensure transparency
and fairness. It can also be a maze
filled with traps for the unwary.
Professionals for the estate are
required to have their engagement
approved by the court at the
beginning of the case and then to
have all of their fees and expenses
approved at the end of the case.
Successfully achieving these two
steps assures that a professional
is legally entitled to payment. But
actually finding the funds can be
a challenge. Having fees awarded,
only to then discover that there is no
money to pay them, can be a tough
lesson for the lawyers and financial
advisors serving a business debtor.
There are numerous ways that
professionals for the debtor can
structure their fees to ensure that they
get paid, some better than others.
What follows are the seven primary
ways to fund fee awards in Chapter 11.
1 The Prepetition retainer. Retainers are industry standard
for professionals in many types of
engagements, and Chapter 11 is no
different. The key is to ensure that the
check clears—or better yet, the wire is
received—prior to the filing of the
Chapter 11 petition. A common
mistake is that retainer funds fail to
clear the debtor’s bank until after the
filing, rendering the payment an
impermissible prepetition unpaid
With the high cost of Chapter 11,
it is often impossible to obtain
a prepetition retainer large