Ch. 11 Professionals Don’t Have to Disgorge Collected Fees

Chapter 11 professionals in a bankruptcy case that is later converted to Chapter 7 due to insolvency don’t have to share a portion of their collected fees with an unpaid professional, a bankruptcy court in New Mexico held Sept. 15 (In re Santa Fe Med. Grp., LLC, 2016 BL 304831, Bankr. D.N.M., 15-11247-ta7, 9/15/16).

Judge David T. Thuma of the U.S. Bankruptcy Court for the District of New Mexico concluded that bankruptcy courts don’t have the authority to order disgorgement of fees upon insolvency.

In a typical “disgorgement upon insolvency” case, “a debtor attempts to reorganize in ...