Case Summary:
The Debtors filed their Chapter 7 petition on August 8, 2001. An attorney for the trustee was appointed. The Debtors valued certain owned real estate. The Trustee’s attorney investigated that value and found that the county tax assessor valued the property substantially higher and informed the Debtors. The Debtors then moved to convert their case to Chapter 13 and their motion was granted. The Trustee’s attorney objected to confirmation of the plan because it failed to meet the best interest of creditors’ test. The Debtors amended their plan before the final confirmation hearing was held. Meanwhile attorneys fees were incurred on behalf of the Trustee preparing for the hearings, hiring an appraiser, and examining the Debtors at their § 341 meeting.

In December 2002 the Trustee’s attorney moved for an allowance of an administrative claim for services rendered in connection with the bankruptcy case and debtors objected. The Chapter 13 Trustee did not object.

At their motion hearing, Trustee’s attorney argued that it was entitled to administrative expense priority under U.S.C. § 503(b)(1). Trustee’s attorney filed a brief supporting their motion. Debtors did not file a brief.

It was determined that Trustee’s attorney objected to confirmation and incurred post-conversion costs and expenses, based upon its pre-conversion investigation of the value of debtors’ real estate. The post-conversion costs and expenses were intertwined with the pre-conversion services that Trustee’s attorney rendered and are reasonable in light of the benefit to creditors. Post-conversion costs and expenses should be treated as administrative expenses.

Statute/Rule References:
11 U.S.C. § 327 -- Employment of Professionals
11 U.S.C. § 329 -- Debtor's Transactions with Attorneys
11 U.S.C. § 330 -- Compensation of Professionals
11 U.S.C. § 330(a)(4)(A) and (B) -- Compensation of Officers
11 U.S.C. § 348 -- Conversion
11 U.S.C. § 503 -- Administrative Expenses
11 U.S.C. § 507(a)(1) -- Priorities
11 U.S.C. § 507(b) -- Priorities
11 U.S.C. § 726 -- Distribution of Property of Estate
11 U.S.C. § 1306 -- Property of the Estate
11 U.S.C. § 1322(a)(2)
Fed. R. Bankr. P. 2016(a) -- Application for Compensation of Reimbursement
Fed. R. Bankr. P. 2016(b) -- Disclosure of Compensation Paid or Promised to Attorney for Debtor
Wisconsin Supreme Court Rule 20:1:1 -- Competence
Wisconsin Supreme Court Rule 20:3:3 -- Candor Toward the Tribunal

Key Terms:
Attorney Fees - Award in Dischargeability Action
Personal Injury Proceeds
Post Conversion
Pre-Conversion
Sanctions