Why the Engagement Letter Matters
The engagement letter (also called "retainer agreement" or "fee agreement") is the contract between you and your bankruptcy attorney. It is the document that defines:
- Exactly what work the attorney will do for you
- How much you pay, when, and to whom
- What happens if something changes (conversion, dismissal, adversary, contested matter)
- What services are excluded and require an additional fee
Key principle: The engagement letter is the best evidence of what you actually agreed to. If a dispute arises later about scope, fees, or duty, the written document controls - not verbal assurances.
The same letter is also the evidence used by the court and the U.S. Trustee under Rule 2016(b) to evaluate whether the attorney's Section 329(a) disclosure matches reality.
Section 1 - Basic Terms (Must Be in Writing)
✓Attorney's legal name and bar number. Not just the firm name - the specific attorney responsible for your case.
✓Bar admission information. Which state bars the attorney is admitted in. Critical if your case is in a state where the attorney is not primarily admitted.
✓Date of the engagement letter. With space for your signature date.
✓Client identity. Are you signing personally, on behalf of a business, or both? This determines who the attorney represents.
✓Chapter of bankruptcy covered. Chapter 7? Chapter 13? Chapter 11 (Subchapter V or standard)? The scope is chapter-specific.
Section 2 - Scope of Services
This is the most important section to read carefully. An ambiguous scope is how attorneys later justify charging extra fees.
✓What services are included? Petition preparation, schedules, SOFA, Section 341 meeting, plan confirmation, and any chapter-specific routine work should be listed explicitly.
✓What services are excluded? Common exclusions: adversary proceedings, contested confirmation, stay relief litigation, objections to claims, plan modifications, dischargeability disputes, tax litigation.
✓How are excluded services handled? Separate hourly rate? Separate retainer? Written amendment to engagement? Get the process in writing.
✓Conversion between chapters. What happens to the fee arrangement if Chapter 7 converts to 13, or 13 converts to 7, or 11 converts to 7?
✓Dismissal. What happens if the case is dismissed before discharge or confirmation? Is any portion of the fee refundable? Under what circumstances?
Common trap: "Scope of representation includes all matters necessary to conclude the bankruptcy case." This phrasing is so broad it means nothing - and it lets the attorney later define "necessary" however they want. Ask for specific scope.
Section 3 - Fees and Payment
✓Total fee amount (if flat fee). The single dollar figure, stated plainly.
✓Hourly rates (if hourly). Rate for each person who may bill - lead attorney, associate, paralegal, staff. If multiple rates, list each.
✓Minimum retainer required. Up-front payment before work begins. Where is it held? In a trust account?
✓Draw-down mechanism. If a retainer is held in trust, when and how does the attorney draw against it?
✓Filing fees and costs. Are court filing fees, credit counseling fees, and copy charges included in the fee or billed separately?
✓Payment schedule. Pre-petition installments? Through-the-plan payments? Post-petition deferred arrangements?
✓Billing frequency. How often will you receive an itemized invoice? What information will each invoice include?
Under Rule 2016(b), your attorney must file a statement of compensation with the court disclosing the fee arrangement. Ask for a copy of what they intend to file.
Section 4 - Source of Payment
✓Who is paying? Debtor personally, spouse, family member, business, third party?
✓If a third party is paying, who do they represent? This matters for conflict-of-interest analysis.
✓If a business is paying for an individual case (or vice versa), is that disclosed in the engagement letter and in Rule 2016(b)?
✓Any guarantors - i.e., someone other than the client who has agreed to pay if the client does not?
All of these must be disclosed to the court. See the Rule 2016(b) red flags checklist for how these issues play out downstream.
Section 5 - Conflicts of Interest
✓Does the attorney represent any creditor that has a claim in your case?
✓Does the attorney represent your spouse if your spouse is not jointly filing?
✓Does the attorney represent a business you own? Or a business partner, co-owner, or co-signer?
✓In Subchapter V: the attorney representing the debtor must meet the disinterestedness requirement of Section 1195/327. The engagement should reference this.
✓Fee-sharing arrangements with non-attorneys (petition preparers, lead-generation services, referral platforms) must be disclosed.
Section 6 - Communication and Staffing
✓Who is the primary attorney you will communicate with?
✓Will other attorneys or staff work on your case? At what rates?
✓Who will appear at the Section 341 meeting - the attorney personally, or a substitute?
✓How quickly will the attorney respond to your emails or calls? What is the expected turnaround?
✓Will you receive copies of filings, court orders, trustee correspondence, and creditor claims?
Section 7 - Termination and Withdrawal
✓How can you terminate the engagement? What notice is required?
✓How can the attorney withdraw? In a filed case, withdrawal requires court approval; the engagement should acknowledge this.
✓If the attorney withdraws, what portion of the fee is refundable? And when?
✓Does the attorney have a retaining lien on your file? What conditions apply?
✓What happens to your client file after representation ends? Electronic copy? Paper copy? Who pays for retrieval?
Section 8 - Dispute Resolution and Fee Review
✓Does the engagement require arbitration of fee disputes? Binding arbitration waives your right to go to court.
✓Does the engagement waive your right to challenge fees under Section 329(b)? It cannot. Any such waiver is void as against the statutory supervisory authority of the bankruptcy court. But some engagements try.
✓Does the engagement require that you first pay disputed amounts before challenging them? This is separate from waiver and can be negotiated.
✓Does the engagement require any confidentiality provisions that would prevent you from disclosing fee arrangements to the court or UST? It cannot. Bankruptcy disclosure obligations override any private confidentiality agreement.
Red flag: If an engagement letter contains a clause preventing you from challenging fees in the bankruptcy court or disclosing them to the UST, that clause is not enforceable. But the presence of such a clause tells you something about the attorney's posture.
Section 9 - Specific Subchapter V Considerations
If the case is a Subchapter V small-business reorganization, additional items should appear:
✓Employment application acknowledgment. The attorney will file an application to be employed under Section 1195/327. Is this covered in the engagement?
✓Court approval of post-petition fees. Post-petition fees are paid from the estate only after court approval of a fee application under Rule 2016(a). The engagement should explain this mechanism.
✓Interaction with the Subchapter V trustee. The Subchapter V trustee has an independent role under Section 1183. The engagement should acknowledge the trustee's involvement and how your attorney will coordinate.
✓Plan filing timeline. Plans must be filed within 90 days of the order for relief (Section 1189(b)). Who is responsible for meeting this deadline, and what happens if missed?
Red Flags Summary
Walk away (or ask serious questions) if any of these appear:
- Scope described only in general terms, no specific services listed
- Attorney refuses to put additional assurances in writing
- Fee quoted verbally as "around" or "approximately" a number, not in writing
- No clear explanation of what happens on dismissal or conversion
- Arbitration clause that waives court oversight
- Clause prohibiting disclosure of fees to the UST or court
- Payment required to a non-attorney entity or third party
- No mention of Rule 2016(b) disclosure
- "Fee is non-refundable regardless of outcome" language without exception
- Engagement letter not signed by the specific attorney who will represent you
If You Already Signed an Engagement Letter
If you are already in a case and have concerns about the engagement letter, you still have options:
- Request a copy if you do not have one. Attorneys must provide clients with copies of engagement agreements on request.
- Review against what was disclosed to the court under Rule 2016(b). Discrepancies may be actionable.
- Request itemized billing for all work performed. You are entitled to a detailed accounting.
- Consult an independent attorney about fee reasonableness. A second opinion is often available for a fixed consultation fee.
- Contact the U.S. Trustee if the arrangement involves undisclosed terms, excessive fees, or conflicts of interest.
- File a Section 329(b) motion through independent counsel, or request Rule 2017 sua sponte review by the court.