Divorce Attorney Protected in Bankruptcy Case

I find this recent case surprising. A debtor files chapter 13 bankruptcy. The debtor still owes her divorce attorney almost $15,000. The divorce attorney in the fee agreement set forth that the attorney has a lien on the files unless the attorney is paid, commonly known as a retaining lien.

Debtors in chapter 13 can file motions to value secured property so that the debtor only has to pay the value of the collateral. (This is an overbroad statement so discuss this issue with your attorney.) So the debtor filed a motion to value the retaining lien. What is the value of the documents retained by the attorney?

Miami bankruptcy Judge Cristol held that the value of the retaining lien in chapter 13 is the full amount of the debt based on state law.In re Alfaro, 2012 Bankr Lexis 1626, (Bankr. S. D. FL April 13, 2012)(11-35116)

However, what is the net result? The opinion recites that the debtor had informed the court that she did not need the documents. So as a practical matter, the debtor could surrender any claim to recovering the files held under the retaining lien.

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