## Facts

- Three Chapter 7 debtors retained bankruptcy counsel before filing and signed retainer agreements covering case preparation and prosecution.
- Unlike typical retainers, the fees were payable in installments, with some payments due after the petitions were filed.
- Counsel performed the agreed services; each debtor obtained a discharge and the cases closed.
- After discharge, the law firms attempted to collect the remaining unpaid installments.
- The debtors filed adversary proceedings seeking contempt sanctions for violation of the discharge injunction under 11 U.S.C. § 524.
- The debtors did not dispute that the fees were reasonable in amount.

## Issues

1. Whether unpaid installments owed under a prepetition bankruptcy retainer agreement are discharged under 11 U.S.C. § 727(b) when some installments come due postpetition.
2. Whether 11 U.S.C. § 329(b) implicitly makes “reasonable” debtor’s-attorney fees nondischargeable, notwithstanding § 727(b) and the enumerated exceptions in § 523.

## Decision

- The Seventh Circuit reversed and remanded.
- The court held the debtors’ obligations to pay under the prepetition retainer agreements were prepetition “debts” (or “claims”) discharged by § 727(b), absent a § 523 exception.
- The court rejected the view that § 329(b) creates or implies a nondischargeability rule for “reasonable” attorney fees.
- Because the obligations were discharged, post-discharge collection efforts implicated the § 524 discharge injunction.

## Legal Principles

- A Chapter 7 discharge under § 727(b) eliminates all prepetition debts except those expressly excepted by § 523; courts may not add extra-textual exceptions.
- A contractual obligation incurred prepetition to pay debtor’s bankruptcy counsel remains a prepetition debt/claim even if installments are scheduled or demanded after filing.
- Section 329(b) authorizes bankruptcy courts to review debtor’s counsel compensation and order reduction/disgorgement of excessive fees; it regulates the amount of compensation, not dischargeability.
- The absence of debtor’s-attorney fees from § 523 means such fee claims are treated like other unsecured prepetition debts for discharge purposes.

## Conclusion

The Seventh Circuit held that unpaid installments under prepetition Chapter 7 retainer agreements are discharged by § 727(b) unless covered by a specific § 523 exception, and that § 329(b)’s fee-review power does not create an implied nondischargeability rule for “reasonable” attorney fees; the case was remanded for proceedings consistent with that holding.


Bethea v. Robert J. Adams & Assocs., 352 F.3d 1125 (7th Cir. 2003)