Chicago Courts are clamping down on Chapter 13 plans that give super-priority to attorneys' fees

ProPublica and other publications (including FindLaw) have been reporting on a trend in the Chicago courts to limit attorneys' fees to counsel for chapter 13 debtors for so-called "step-up" plans. A step-up plan requires the payment of attorneys fees before other creditors. Sometimes these plans leave debtors with unpaid car loans or other secured debt and courts have been concerned about the level of disclosure attorneys make to clients about the implications of a step up plan that apparently places the claims of the attorneys ahead of the claims of secured creditors. According to one case, "[t]he question to be answered here is whether a chapter 13 plan may be confirmed where a secured creditor is to continue receiving adequate protection payments under the plan until the debtor's attorneys' fees are paid in full, after which time the payments to the secured creditor under the plan "step up" to an increased amount sufficient to pay off the creditor's claim in the time allotted under the plan." In re Carr, Nos. 17-29195, 17-25013, 2018 Bankr. LEXIS 1109, at *8-9 (Bankr. N.D. Ill. Apr. 10, 2018). In the Carr the court ultimately concluded that "[t]he fee applications filed in both cases will be denied without prejudice and may be refiled subject to disclosure of the agreements between the debtor and counsel as to the compensation. Each fee application filed before this court, whether the fees are to be paid before the claims of creditors or simultaneously with the claims of creditors, must have attached to it the agreements required by Local Rule 2016-1."