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In Re Wayne Eric Puffer v. Denise M. Pappalardo

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Before Selya, Circuit Judge, Souter, *fn1 Associate Justice, and Lipez, Circuit Judge.

This bankruptcy case involves a dispute over attorneys’ fees. Resolving this dispute requires us to address a question of first impression at the appellate level concerning the propriety of so-called “fee-only” plans in Chapter 13 bankruptcy cases. This is an issue that has divided the bankruptcy courts. Compare In re Paley, 390 B.R. 53, 59 (Bankr. N.D.N.Y. 2008) (rejecting fee-only plan as contrary to spirit and purpose of Bankruptcy Code), and In re Dicey, 312 B.R. 456, 459-60 (Bankr. D.N.H. 2004) (same), with In re Elkins, No. 09-09254-8, 2010 WL 1490585, at *3 (Bankr. E.D.N.C. Apr. 13, 2010) (stating that “[t]here are many permissible reasons to file [fee-only] chapter 13 cases”), and In re Molina, 420 B.R. 825, 829-33 (Bankr. D.N.M. 2009) (upholding good faith of fee-only plan). The bankruptcy court in this instance concluded that such plans are per se proffered in bad faith and disallowed virtually all attorneys’ fees. On an intermediate appeal, the district court upheld the bankruptcy court’s ruling.

The matter has now been appealed to this court. We have had the benefit of briefing (including the helpful submission of an amicus) and oral argument. After careful consideration, we hold that fee-only plans are not per se in bad faith. Consequently, we reverse the order appealed from and remand for further proceedings consistent with this opinion.

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