Corporate Bankruptcy Attorney Fees in New York

Which New York Bankruptcy Court Will Review the Fees

New York has four federal districts, each with its own bankruptcy court and local rules. Most downstate business cases fall in one of two:

• Southern District of New York (SDNY): Manhattan, the Bronx, Westchester, Rockland, Putnam, Orange, Dutchess and Sullivan counties, sitting in Manhattan, White Plains and Poughkeepsie. SDNY publishes its own fee guidelines for professionals (General Order M-447) in addition to the national U.S. Trustee guidelines.
• Eastern District of New York (EDNY): Brooklyn, Queens, Staten Island, Nassau and Suffolk counties, sitting in Brooklyn and Central Islip.
• Northern District (NDNY) and Western District (WDNY): Albany, Syracuse, Utica, Buffalo and Rochester.

Venue is governed by 28 U.S.C. § 1408. A corporation or LLC may file where it is incorporated or organized, where its principal place of business is located, or where its principal assets have been for the greater part of the 180 days before filing. A Brooklyn restaurant group, a Long Island contractor or a Queens medical practice will ordinarily file in EDNY. A Manhattan or Westchester business will ordinarily file in SDNY. The district matters for fees because each court's interim compensation procedures, fee application format and judges' expectations differ in small ways that affect timing and cash flow.

The Three Cost Tiers: Chapter 7, Subchapter V and Traditional Chapter 11

Business owners often arrive asking about "Chapter 11" when the right vehicle, and the right cost tier, is something else. The three realistic options for a New York business are:

The filing fees above are set by the Judicial Conference and change periodically. Confirm the current amount on the court's website before filing.

Chapter 7 for a Corporation or LLC: Flat Fees and the Section 329 Statement

A corporate Chapter 7 is a liquidation. Management hands the business to a trustee, who sells the assets and distributes the proceeds. The entity itself receives no discharge (11 U.S.C. § 727(a)(1)), so the goal is an orderly wind-down, not a fresh start. Because counsel's work is concentrated before filing and in the first few weeks after, most attorneys charge a flat fee paid in full before the petition is filed.

The flat fee covers gathering the business records, preparing the petition, schedules and statement of financial affairs, filing the corporate resolution authorizing the bankruptcy, attending the meeting of creditors under § 341, and responding to the trustee's document requests. For a small company with a few bank accounts, a lease and ordinary trade debt, flat fees in New York commonly fall in the range of $5,000 to $15,000. A company with real property, litigation, payroll tax exposure or a large number of creditors may pay more, and some practitioners quote $25,000 or above for those cases.

Even though the court does not pre-approve the fee, counsel must disclose it. Section 329 and Bankruptcy Rule 2016(b) require a statement of the compensation paid or agreed to be paid within the year before filing. If the court finds the fee exceeds the reasonable value of the services, it may order the excess returned to the estate (§ 329(b)). The Chapter 7 trustee's own attorney, if one is retained, is employed under § 327 and paid only after a court-approved fee application, but that cost comes from the estate, not from the owners.

Subchapter V: What a Small New York Business Actually Pays

Subchapter V of Chapter 11 (11 U.S.C. §§ 1181–1195) was added by the Small Business Reorganization Act of 2019 and is now the vehicle most small New York businesses use to reorganize. It removes the features of traditional Chapter 11 that generate the largest professional fees.

Eligibility

A debtor qualifies if it is engaged in commercial or business activity, at least 50 percent of its debts arose from that activity, and its total noncontingent liquidated secured and unsecured debt does not exceed the statutory cap. The cap was temporarily raised to $7.5 million during the pandemic. That increase expired in June 2024, and the limit reverted to the inflation-adjusted base, which the Judicial Conference set at $3,424,000 effective April 1, 2025. Single-asset real estate debtors are excluded. Bills to restore the higher cap have been introduced in Congress, so confirm the current figure before relying on it.

Why the fees are lower

• No creditors' committee: In a traditional Chapter 11, the committee hires its own counsel and financial advisor, and the debtor's estate pays those fees too. Subchapter V has no committee unless the court orders one for cause.
• No disclosure statement: The plan must contain a brief history of the business, a liquidation analysis and projections (§ 1190), but the separate disclosure statement and its approval hearing are eliminated unless the court orders otherwise.
• No U.S. Trustee quarterly fees: Traditional Chapter 11 debtors pay quarterly fees to the U.S. Trustee under 28 U.S.C. § 1930(a)(6), starting at $250 per quarter and rising with disbursements. Subchapter V debtors are exempt.
• A fixed timetable: The court holds a status conference within 60 days (§ 1188) and the debtor must file its plan within 90 days of the petition (§ 1189(b)). Shorter cases cost less.
• Only the debtor may file a plan: Competing creditor plans, and the litigation they generate, are not available.

The Subchapter V trustee and fee review

Every Subchapter V case has a trustee appointed by the U.S. Trustee under § 1183. The trustee does not run the business. The trustee's job is to facilitate a consensual plan, monitor the debtor's reporting and, if the plan is confirmed over creditor objection, disburse plan payments. The trustee also reviews the professional fee applications and may object, so in practice two sets of eyes review debtor's counsel's bills: the Region 2 U.S. Trustee and the Subchapter V trustee. The trustee's own compensation is an administrative expense paid from the estate, typically on an hourly basis, and is itself subject to court approval.

Two fee rules particular to Subchapter V

• Prepetition claims under $10,000: Under § 1195, a professional is not disqualified from employment under § 327(a) solely because the firm holds a prepetition claim against the debtor of less than $10,000. This lets a business keep its existing accountant or lawyer in some cases where a traditional Chapter 11 would require new professionals.
• Administrative expenses paid through the plan: In a traditional Chapter 11, administrative claims, including allowed attorney fees, must be paid in full on the effective date (§ 1129(a)(9)). Under § 1191(e), if a Subchapter V plan is confirmed without the consent of all impaired classes, administrative expenses may be paid over the life of the plan. This changes how a small debtor budgets for counsel.

Typical Subchapter V cost in New York

Reported New York Subchapter V cases show debtor's counsel fees from the petition through confirmation most often in the range of roughly $35,000 to $100,000, with retainers at the outset commonly between $15,000 and $35,000. Cases with cash collateral fights, lease rejection disputes or contested confirmation run higher. These are illustrative ranges drawn from fee applications filed in the district courts, not a quote.

Traditional Chapter 11: Where the Six-Figure Fees Come From

A business that exceeds the Subchapter V cap, or that elects not to use it, files a traditional Chapter 11. Counsel's fees for a small or mid-size traditional case in SDNY or EDNY frequently start around $75,000 and often exceed $150,000 through confirmation. Large cases run into the millions. The drivers are the disclosure statement process, the creditors' committee and its professionals, contested cash collateral and financing motions, claims objections, and the plan confirmation hearing. The debtor also pays U.S. Trustee quarterly fees for as long as the case stays open.

Retainers for traditional Chapter 11 cases in New York typically run $25,000 to $50,000 for a small debtor and considerably more where multiple secured lenders, union contracts or litigation are involved.

The Retainer and What Happens to It on the Petition Date

In Chapter 11 and Subchapter V, the retainer is paid before filing from the business's own funds. On the petition date, counsel applies the retainer to fees earned for prepetition work and holds the balance. New York courts treat the unapplied balance one of two ways, and the employment application must say which:

• Security retainer: The balance remains property of the estate and is held in trust as security. Counsel draws against it only after the court allows fees. This is the arrangement the Region 2 U.S. Trustee expects in most small cases.
• Evergreen retainer: The debtor replenishes the retainer as fees are allowed and paid. Courts in SDNY and EDNY permit this only on a showing that it is justified by the case and the market, which is uncommon for small debtors.

The source of the retainer must be disclosed. If a principal or affiliate paid it, the court will want to know the terms, because a third-party payor cannot be allowed to direct the representation.

Employing Counsel Under Section 327

A debtor in possession cannot pay its bankruptcy lawyer from the estate until the court has approved the engagement. The application under 11 U.S.C. § 327(a) and Bankruptcy Rule 2014 must show that counsel is a disinterested person as defined in § 101(14) and holds no interest adverse to the estate. The application and the attorney's supporting declaration disclose:

• The scope of the engagement and the hourly rates for each attorney and paralegal;
• The amount of the retainer, who paid it and how much was applied before filing;
• Every connection between the firm and the debtor, its creditors, its insiders, the U.S. Trustee's office and the judge, after a conflicts check against the creditor matrix;
• Whether the firm holds a prepetition claim against the debtor; and
• Any agreement to share compensation, which is prohibited by § 504 except among members of the same firm.

The Region 2 U.S. Trustee reviews each application and files objections where the disclosure is incomplete or the firm's connections raise a question. Employment is ordinarily approved effective as of the petition date if the application is filed within the first few weeks. Late applications risk denial of fees for the gap period, so the application should be filed with or shortly after the first-day motions.

Counsel may also ask the court to approve the fee terms in advance under § 328(a). If the court does, it can later alter the terms only if they prove to have been improvident in light of developments that were not capable of being anticipated. Most small-case engagements are approved under § 330 instead, which leaves the court free to review reasonableness after the fact.

How Fees Are Allowed: Sections 330, 331 and 503(b)

Section 330(a) authorizes the court to award reasonable compensation for actual, necessary services and reimbursement of actual, necessary expenses. The court considers the time spent, the rates charged, whether the services were necessary or beneficial to the estate when performed, whether they were completed within a reasonable time given the complexity of the task, and whether the rates are in line with comparably skilled practitioners outside bankruptcy. Allowed fees are administrative expenses under § 503(b)(2) and share second priority under § 507(a)(2).

Section 331 permits interim fee applications no more often than every 120 days unless the court permits otherwise. In an active case, waiting 120 days for any payment is unworkable, so SDNY and EDNY courts routinely enter interim compensation orders early in the case that set a monthly procedure.

The Interim Compensation Order in SDNY and EDNY

A typical New York interim compensation order works like this:

1. Monthly statement: Around the 20th of each month, counsel serves a statement of the prior month's fees and expenses on the debtor, the U.S. Trustee, any committee and the principal secured lender.
2. Objection period: Recipients have a set window, commonly 14 to 21 days, to object in writing.
3. Partial payment: If no objection is filed, the debtor may pay 80 percent of the fees and 100 percent of the expenses. If an objection is filed, the undisputed portion is paid and the disputed portion is held for the court.
4. Holdback: The remaining 20 percent of fees accumulates as a holdback.
5. Interim fee application: Every 120 days (quarterly in many cases), counsel files a formal application under Rule 2016(a) covering the period. After notice and a hearing, the court allows the fees and authorizes release of the holdback.
6. Final fee application: Before the case closes, counsel files a final application covering the entire case. The court's final allowance supersedes all interim awards, which remain subject to disgorgement until then.

Small Subchapter V cases do not always need a monthly procedure. In a case expected to confirm within six months, counsel may simply file one interim application and a final application, or draw on the security retainer after each allowance. Which approach fits depends on the debtor's cash flow and the size of the retainer.

What the Region 2 U.S. Trustee Looks For

Every fee application in New York is measured against the U.S. Trustee Guidelines for Reviewing Applications for Compensation, 28 C.F.R. Part 58, Appendix A. In cases with $50 million or more in assets and liabilities, the 2013 Large Case Fee Guidelines also apply and require budgets and staffing plans, but those cases are outside the scope of this page. For a small or mid-size debtor, the Region 2 office concentrates on:

• Block billing: Several tasks lumped into one time entry without separate time for each. The guidelines expect entries in tenths of an hour, one task per entry.
• Vague descriptions: "Attention to matter" or "review documents" without identifying what was reviewed and why.
• Duplication: Two attorneys attending the same hearing or conference where one would have sufficed.
• Rate mismatch: Partner-rate time spent on tasks a paralegal or junior attorney could perform.
• Clerical work: Filing, copying and calendaring billed as attorney time. These are overhead and not compensable.
• Expenses: Travel, meals, overtime and in-house copying charges above actual cost. The SDNY guidelines in General Order M-447 set specific limits on several categories.
• Fee application preparation: Time spent preparing the application itself is compensable, but courts expect it to be a modest fraction of the fees sought.

Where the U.S. Trustee objects, the usual result is a negotiated reduction before the hearing rather than a contested ruling. Reductions in the range of a few percent are common. Larger disallowances occur when work did not benefit the estate, for example time spent on a plan the debtor could never have confirmed.

Carve-Outs and Cash Collateral: Getting Paid When a Lender Has a Blanket Lien

Most operating businesses that file in New York have a bank, SBA or merchant cash advance lender with a lien on all receivables, inventory, equipment and deposit accounts. Under § 363(c)(2), the debtor cannot spend that cash collateral without the lender's consent or a court order. If every dollar is encumbered, there is nothing unencumbered from which to pay the estate's professionals. The solution is a carve-out negotiated in the cash collateral or debtor-in-possession financing order.

How a carve-out is structured

A carve-out is the lender's agreement that its lien and any superpriority claim under § 364(c)(1) or § 507(b) are subordinate to a defined pool of professional fees. In SDNY and EDNY orders the pool is usually built in layers:

• Statutory fees: U.S. Trustee quarterly fees and clerk's fees, carved out without limit.
• Pre-trigger fees: All allowed fees of estate professionals incurred before the lender declares a default and sends a carve-out trigger notice, usually capped at the amounts in the approved budget.
• Post-trigger amount: A fixed sum, often between $25,000 and $100,000 in a small case, available for fees incurred after the trigger notice so that counsel can wind the case down or convert it in an orderly way.
• Subchapter V trustee fees: Where applicable, the trustee's compensation is included in the carve-out so the trustee is not left unpaid.

What the New York local rules require

SDNY Local Bankruptcy Rule 4001-2 requires any cash collateral or financing motion to identify and justify certain provisions, including the carve-out for professional fees and any provision that treats debtor's professionals differently from committee professionals. The Eastern District imposes parallel disclosure requirements. Judges in both districts look closely at carve-outs that fund the lender's counsel generously while capping the debtor's, and at carve-outs that exclude fees for investigating or challenging the lender's own lien. The U.S. Trustee's office regularly comments on these terms at the interim and final cash collateral hearings.

The budget as a fee cap

The cash collateral order attaches a 13-week budget. Professional fees appear as a line item. The carve-out for pre-trigger fees is typically limited to the budgeted amounts, so the budget operates as a soft cap on counsel's fees. If the case takes longer or becomes more contested than projected, the debtor must negotiate a budget amendment with the lender or seek court approval to exceed it. A debtor that underbudgets professional fees at the start can find itself unable to pay counsel midway through the case.

Conversion to Chapter 7 and administrative insolvency

If a Chapter 11 fails and converts to Chapter 7, counsel's allowed but unpaid Chapter 11 fees do not disappear, but they move down the line. Under § 726(b), administrative expenses incurred in the Chapter 7 case after conversion, including the Chapter 7 trustee's commission and the trustee's counsel, are paid before administrative expenses from the Chapter 11 period. If the estate is administratively insolvent, meaning there is not enough unencumbered value to pay all administrative claims in full, Chapter 11 professionals share pro rata in what remains after the Chapter 7 costs. A properly drafted carve-out survives conversion and gives counsel a source of payment ahead of the lender for the capped amount. Without one, Chapter 11 counsel in a converted case often collects a fraction of its allowed fees. The holdback and security retainer are what protect counsel in that scenario, which is why New York practitioners insist on both.

Withdrawal for Nonpayment

Counsel in a Chapter 11 cannot simply stop working when the money runs out. Withdrawal requires a motion and court approval under Local Bankruptcy Rule 2090-1 in both SDNY and EDNY, and the court applies Rule 1.16 of the New York Rules of Professional Conduct. Nonpayment is a recognized ground, but the court weighs the stage of the case, the prejudice to creditors and whether substitute counsel is available. A motion to withdraw filed on the eve of a confirmation hearing or a contested sale is often denied or adjourned. A corporation cannot appear without counsel, so a debtor whose lawyer withdraws and who cannot retain a replacement faces dismissal or conversion.

How We Quote Fees for a Business Bankruptcy

We quote fees for business cases in writing after an initial review of the company's debts, assets, lender documents and recent financial statements. The engagement letter states the retainer, the hourly rates for each timekeeper and whether the retainer is a security or evergreen retainer, and the same terms are disclosed to the court in the § 327 application or the § 329 statement. We do not quote a Chapter 11 fee before determining whether the company qualifies for Subchapter V, because that single question has the largest effect on cost. The ranges on this page describe what New York courts have allowed in comparable cases. They are not a quote for your matter.

Business owners should also consider how the company's debt affects them personally. Personal guarantees, trust fund tax liability and co-signed loans survive a corporate filing. Our pages on liability for a spouse's debt in New York, asset protection and transfers between spouses, asset protection for physicians and legal planning for executives address those questions.

Frequently Asked Questions

Can my business pay its bankruptcy lawyer without court approval?

Before filing, yes. The retainer is paid from company funds and disclosed afterward under § 329. After a Chapter 11 or Subchapter V petition is filed, no. Every payment from the estate to debtor's counsel requires employment under § 327 and allowance under § 330 or § 331, or authorization under an interim compensation order. In a corporate Chapter 7, counsel is paid before filing and the court may review the fee for reasonableness.

Is Subchapter V always cheaper than traditional Chapter 11?

In nearly all cases. The savings come from the absence of a creditors' committee, the elimination of the disclosure statement, the exemption from U.S. Trustee quarterly fees and the 90-day plan deadline. The debtor does pay the Subchapter V trustee's fees, but those are typically far less than committee professionals would cost.

What is the Subchapter V debt limit in New York right now?

The limit is national, not state-specific. After the temporary $7.5 million cap expired in June 2024, the limit reverted to the inflation-adjusted figure, which became $3,424,000 on April 1, 2025. Congress has considered legislation to raise it again, so check the current figure before filing.

Who pays the creditors' committee's lawyers?

The debtor's estate does. In a traditional Chapter 11, committee counsel and any committee financial advisor are employed under § 1103 and paid under § 330 from the same estate funds that pay debtor's counsel. This is one of the largest reasons traditional Chapter 11 costs more than Subchapter V.

What happens to my lawyer's fees if the case converts to Chapter 7?

Allowed Chapter 11 fees become administrative claims that are paid after the Chapter 7 administrative expenses under § 726(b). If there is a carve-out, the capped amount is paid ahead of the secured lender. Any security retainer still held by counsel can be applied to allowed fees with court approval. Fees that have not been allowed when the case converts must still go through a fee application before the Chapter 7 trustee can pay them.

Do out-of-state companies really file in Manhattan to get a particular judge?

Large companies choose SDNY for its experienced bench and developed case law, and venue under 28 U.S.C. § 1408 permits filing where any affiliate has filed. That strategy is irrelevant to a small New York business, which should file in the district where it operates. Filing in the wrong district invites a transfer motion and adds cost.

About This Page

This page was prepared by the Law Offices of Albert Goodwin. Albert Goodwin is admitted to practice in the State of New York and before the federal courts. The firm advises New York individuals and closely held businesses on debt, asset and bankruptcy matters, including the interaction between a business filing and the owners' personal and estate exposure. The content is general legal information about the Bankruptcy Code and the fee practices of the New York bankruptcy courts. It is not legal advice and does not create an attorney-client relationship. Fee figures are illustrative ranges, not quotes, and the court controls what is ultimately allowed.

To discuss a business bankruptcy in New York, call 212-233-1233 or email [email protected]. Bring the company's most recent balance sheet, a list of secured and unsecured creditors with approximate balances, and copies of any loan and security agreements. Those three items determine the chapter, the venue and the likely cost.

Statutes, Rules and Guidelines Cited

• 11 U.S.C. § 101(14): definition of disinterested person
• 11 U.S.C. §§ 327, 328, 329, 330, 331: employment and compensation of professionals
• 11 U.S.C. § 363(c)(2): use of cash collateral
• 11 U.S.C. § 364(c)(1): superpriority financing claims
• 11 U.S.C. §§ 503(b)(2), 507(a)(2), 507(b): administrative expense priority
• 11 U.S.C. § 504: prohibition on fee sharing
• 11 U.S.C. § 726(b): priority of Chapter 7 administrative expenses after conversion
• 11 U.S.C. § 727(a)(1): no discharge for corporate Chapter 7 debtors
• 11 U.S.C. §§ 1102, 1103, 1125, 1129(a)(9): committees, disclosure statements and plan payment of administrative claims
• 11 U.S.C. §§ 1181–1195: Subchapter V
• 28 U.S.C. § 1408: venue
• 28 U.S.C. § 1930(a)(6): U.S. Trustee quarterly fees
• 28 C.F.R. Part 58, Appendix A: U.S. Trustee fee guidelines
• Federal Rules of Bankruptcy Procedure 2014 and 2016
• SDNY General Order M-447 (Amended Guidelines for Fees and Disbursements for Professionals)
• SDNY Local Bankruptcy Rules 2090-1 and 4001-2; EDNY Local Bankruptcy Rule 2090-1
• New York Rules of Professional Conduct, Rule 1.16