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Third-Party Payments to Estate Professionals: Avoiding the Traps

American Bankruptcy Institute Journal

Many debtors who need chapter 11 relief inevitably lack the cash to file a case, but for those lawyers who are unable to contribute their time pro bono, getting paid is important. In addition to the debtor’s assets or income, a distressed chapter 11 debtor might have third-party sources for payment to debtor’s counsel. There are at least three hurdles or traps involving third-party sources of payment, however: disclosure of third-party payment, court approval of employment where payment will be made from a third party, and court approval of payment by a nondebtor third party.

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Reprinted with permission from the ABI Journal, Vol. XXXVII, No. 1, January 2018.

The American Bankruptcy Institute is a multi-disciplinary, non­partisan organization devoted to bankruptcy issues. ABI has more than 12,000 members, representing all facets of the insol­vency field. For more information, visit



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