Following dismissal of an adversary proceeding for nondischargeability of debt under a voluntary Chapter 13 bankruptcy, Debtor’s attorney applied for compensation (“Application”). The Standing Chapter 13 Trustee (“Trustee”) objected to the Application. The Trustee asserted that although the services provided were beneficial and necessary to the Debtor pursuant to 11 U.S.C § 330(a)(4)(B), they were not “necessary to the administration of, or beneficial at the time which the service was rendered toward the completion of” the case pursuant to 11 U.S.C. § 330(a)(3)(C). The Trustee made this assertion because the adversary proceeding related to the nondischargeability of debt, and although the debt was found to be dischargeable, such a finding did not lead to a reduction of the debt and no attorneys’ fees were awarded. The Debtor’s counsel responded by arguing that the language of 11 U.S.C. § 330(a)(4) is clear and there is no requirement that an application for compensation satisfy (4)(A) and provide a benefit for the estate/necessary for the administration, as well as satisfy (4)(B) to provide services that provide a benefit and are necessary to the Debtor.

Finding that a lack of benefit to the estate is not an absolute bar to compensation of a debtor’s counsel under § 330(a)(4)(B), the Court overruled the objection of the Trustee. The Court found that the magnitude of the claim in the adversary proceeding and its potential impact on the ability of the Debtor to achieve a fresh start were sufficient to determine that the services were a necessary benefit to the Debtor within the exceptions to the general rule that fees are compensable only if there is a benefit to the estate.

Statute/Rule References:
11 U.S.C. § 330 -- Compensation of professionals

Key Terms:
Compensation of Professionals