## Facts

- Michael Ray Dean and Peni Lee Dean retained bankruptcy attorney Kelly I. Beeman in December 2007 to evaluate their financial situation and, if appropriate, prepare and file a Chapter 7 case; they paid him $1,875.
- One of the Debtors’ main assets was a 2003 Hurricane motorhome that Mr. Dean used as a residence while working in Nevada.
- The Debtors told Beeman the motorhome had been financed with a loan from Peni Dean’s mother, Diane Gladman, and that Gladman was supposed to have a security interest in the motorhome.
- The Debtors could not provide Beeman with documentation showing that Gladman’s lien had been properly created and perfected, which made Beeman doubtful about the lien’s status.
- Beeman advised the Debtors that, before filing bankruptcy, they should have independent counsel assist with documenting and perfecting Gladman’s lien; Beeman did not agree to perform that work himself.
- The Debtors attempted to perfect the lien on their own and later told Beeman that the lien had been perfected.
- Beeman filed the Debtors’ Chapter 7 petition on February 11, 2008, and prepared schedules listing the motorhome and listing Gladman as a secured creditor.
- Beeman had the Debtors initial each page of the petition and schedules to confirm accuracy, and he largely relied on the Debtors’ statements about the lien.
- Beeman did not obtain or review lien documents, did not confirm whether Gladman was listed as lienholder on the motorhome title, and did not check readily available Idaho Transportation Department title information.
- In fact, there were no liens on the motorhome, and Gladman’s claimed security interest was unenforceable in the bankruptcy case.
- As a result, the motorhome was treated as unencumbered property of the estate and the Debtors had to surrender it to the Chapter 7 trustee.
- The Chapter 7 trustee moved under 11 U.S.C. § 329(b) for an order requiring Beeman to disgorge a portion of his fee, arguing the Debtors received inadequate representation regarding the motorhome lien.

## Issues

1. Under 11 U.S.C. § 329(b), did the $1,875 fee exceed the reasonable value of Beeman’s services because he failed to take reasonable steps to verify and protect the claimed lien on the Debtors’ motorhome?
2. If any portion of the fee was excessive, what amount should be returned to the Debtors?

## Decision

- The court granted the trustee’s § 329(b) motion in part.
- The court found Beeman’s services were deficient as to the investigation and handling of the alleged motorhome lien, and that this shortfall reduced the value of his representation to the Debtors.
- The court concluded that some, but not all, of the $1,875 fee exceeded the reasonable value of the services provided.
- The court ordered Beeman to disgorge a portion of the fee to the Debtors.

## Legal Principles

- Under 11 U.S.C. § 329(b), the bankruptcy court may review compensation paid to a debtor’s attorney and may order return of fees to the extent the compensation exceeds the reasonable value of the services rendered.
- In assessing reasonable value, the court considers the nature and quality of the services actually provided, not merely the fact that a petition was filed or a discharge was obtained.
- Debtor’s counsel in a consumer bankruptcy case must do more than record the client’s assertions when an important factual point can be confirmed through basic, accessible checks; reasonable inquiry is required when counsel has reason to doubt accuracy.
- Partial disgorgement is an available remedy when some of counsel’s work had value but a material failure in representation made the full fee unreasonable.

## Conclusion

In In re Dean, the bankruptcy court partially reduced debtor’s counsel’s compensation under § 329(b) after concluding that counsel unreasonably failed to verify whether a claimed lien on the Debtors’ motorhome was properly documented and perfected, leading to the asset being treated as unencumbered estate property and surrendered to the trustee; because this lapse diminished the value of the representation, the court ordered partial disgorgement of the attorney’s fee.


In re Dean, 401 B.R. 917 (2008)