I-1-2-3.Representative(s) Who May Charge and Collect a Fee

Last Update: 1/28/03 (Transmittal I-1-44)

A. Who May Charge a Fee

Only the claimant's duly appointed representative(s) may charge or collect a fee for services he/she provided in a matter before the Social Security Administration (SSA). A claimant must make all appointments in writing, using either a Form SSA-1696-U4 (Appointment of Representative) (refer to POMS GN 03910.090, Exhibit 2, or Social Security Online, Representing Clients, http://www.socialsecurity.gov/online/ssa-1696.html) or an equivalent statement. If a law firm or other entity is involved, only the duly appointed individual(s) in that firm or entity may file a fee agreement or petition and receive fee authorization and payment for services performed.

B. Multiple Representatives

If a claimant appoints more than one representative and the representatives are:

  • associated in a firm, partnership or legal corporation:

    • Fee agreement cases: those representatives must sign a single fee agreement unless the representative who did not sign the fee agreement waived charging and collecting a fee.

    • Fee petition cases: each duly appointed individual must file a separate fee petition for the services he/she performed.

  • not members of a single firm, partnership or legal corporation:

    • Fee agreement cases: the agreement is excepted from the fee agreement process, unless the claimant and the appointed representative(s) from a single firm, partnership or legal corporation signed the fee agreement and any other appointed representative(s) waived charging and collecting a fee.

    • Fee petition cases: each duly appointed individual must file a separate fee petition for the services he/she performed.

C. Claimant Files for Bankruptcy

1. Background

When an individual begins a bankruptcy proceeding by filing a bankruptcy petition with the bankruptcy court, the filing of that petition gives rise to an automatic “stay.” The “stay” generally suspends:

  • the commencement or continuation of nearly all proceedings or actions to adjudicate any claim against the property of the debtor that was or could have been commenced prior to the filing of the bankruptcy petition, and

  • any efforts to collect on any claim against the debtor that arose prior to the filing of the bankruptcy petition.

This stay continues until such time as the bankruptcy court grants relief from the stay; the stay expires because the bankruptcy case is closed or dismissed; or a discharge is granted.

2. Policy

a. Initial Processing of a Fee Agreement or Fee Petition After Receiving Bankruptcy Petition Notice

When SSA becomes aware that the claimant has filed for bankruptcy and has listed the representative as an unsecured debtor, SSA stops all actions to:

  • adjudicate the representative's claim for fees,

  • set the amount of the representative's fee (either initially or in response to a request for administrative review from any party), or

  • pay an authorized fee to an attorney representative from past-due benefits.

Accordingly, the decision maker may not issue a notice approving or disapproving a fee agreement after SSA is notified that the claimant filed for bankruptcy and listed the representative as an unsecured debtor. In addition, SSA will not authorize a fee based on a fee agreement or fee petition, if it has not already done so, or issue any payment to the attorney during the bankruptcy “stay.”

The automatic stay that follows from the bankruptcy proceeding merely suspends the adjudication or collection of the debt, and does not automatically eliminate the debt. Therefore, for both fee agreements and fee petitions, SSA will continue to withhold the appropriate amount from past-due benefits, pursuant to section 206 of the Social Security Act, for possible future payment to an attorney representative. Refer to I-1-2-9 for information on direct payment of fees to attorney representatives.

b. Actions Based on Bankruptcy Court Instructions

  1. Bankruptcy Proceeding Pending

    While the bankruptcy proceeding is pending, either the claimant or the representative may ask the bankruptcy court to lift the automatic stay to allow SSA to adjudicate the amount of the fee and/or to allow SSA to pay the fee from withheld funds.

    • If the bankruptcy court allows SSA to adjudicate the amount of the fee, SSA will resume its normal procedures to the extent authorized by the court. If SSA has not issued a determination on the fee agreement, it will do so. If SSA has not yet set a fee, SSA will set the fee following regular fee agreement or fee petition procedures.

    • If the court lifts the stay and authorizes SSA to pay the approved attorney's fee from withheld benefits, SSA will take the actions necessary to comply with the court's action.

    • If the bankruptcy court does not lift the stay, SSA will continue to hold any fee-related actions in suspense until the bankruptcy case is concluded.

  2. Bankruptcy Outcomes

    There are several possible outcomes of a bankruptcy case. SSA responds in accordance with the outcome.

    • If the outcome of the bankruptcy case is a discharge (release) of the claimant's debt to the representative, the claimant has no further responsibility to the representative. SSA will release any withheld funds to the claimant and, if necessary (e.g., because of the representative's inquiry), advise the parties of the action taken pursuant to the court's order. SSA will not approve or disapprove a fee agreement or act on a fee petition that covers services performed during the bankruptcy time period.

    • If the outcome of the bankruptcy case does not release the claimant from his/her obligation to the representative, SSA will resume its normal activities with regard to the fee agreement or fee petition.

    • If the outcome of the bankruptcy case is a partial release by the bankruptcy court, where the claimant's creditors get some percentage of the debt, SSA will act in accordance with the court's order. The fee authorizer or decision maker will resume processing the fee agreement or fee petition, respectively, under normal procedures. The processing center (PC) will calculate and pay the court set percentage of the approved fee to the attorney and release any remaining withheld funds to the claimant.

3. Procedures

a. Bankruptcy Proceeding Pending

  1. Fee Agreements

    If the decision maker issues a favorable decision while a bankruptcy proceeding is pending, the decision maker or support staff, as appropriate, will:

    • Make a preliminary determination on the fee agreement in accordance with the evaluation criteria in I-1-2-12, record the evaluation on a note for the file or draft fee agreement recommendation, and retain that evaluation in the hearings or appeals file.

    • Prepare a letter to the claimant, with copies based on the decision distribution, to explain that SSA cannot approve or disapprove the fee agreement, until the bankruptcy court permits us to do so. Include a statement similar to the following:

      Because you have filed for bankruptcy, I have not approved or disapproved the fee agreement that specifies the fee your representative expects to charge and you expect to pay for your representative's services in connection with your claim for benefits. The Social Security Administration (SSA) may not consider this agreement or authorize a fee for your representative's services until the court permits us to do so. Please notify SSA of the outcome of the bankruptcy court action when you receive it.

    • Include a copy of the bankruptcy notification document, the fee agreement and the letter to the claimant in the claim file under a flag that reads as follows:

      BANKRUPTCY PROCEEDING PENDING

      IF THE OUTCOME OF THE BANKRUPTCY CASE DOES NOT RELEASE THE CLAIMANT FROM HIS/HER OBLIGATION TO THE REPRESENTATIVE, PLEASE NOTIFY THE (ADMINISTRATIVE LAW JUDGE/ADMINISTRATIVE APPEALS JUDGE) TO MAKE A DETERMINATION ON THE FEE AGREEMENT. SEND THE NOTIFICATION TO [E-MAIL ADDRESS(ES) FOR HO OR OAO CONTACT PERSON(S) OR FAX NUMBER].

    • When forwarding the claim to the PC for effectuation of the decision, alert the PC about the bankruptcy proceeding by adding the following to the claims folder route slip:

      NO ACTION TAKEN ON FEE AGREEMENT

      BANKRUPTCY PROCEEDING PENDING.

  2. Fee Petition Anticipated or Filed

    Refer to I-1-2-1(C.) for guidance on informing a representative of fee regulations. If the representative has not submitted a fee agreement and has not waived the right to charge and collect a fee, by the date the Administrative Law Judge (ALJ) or Appeals Council (AC) issues a decision, take these additional actions when the ALJ or AC issues the decision:

    • Include a copy of the bankruptcy court action or SSA's notification of the action in the claims and hearing or appeals files.

    • If the decision is favorable and the representative is an attorney who has not waived direct payment, annotate the claims folder route slip as follows:

      BANKRUPTCY PROCEEDING PENDING.

    If the representative submits a fee petition to the authorizing official while the bankruptcy proceeding is pending, advise the representative by letter, with a copy to the claimant and any other parties to the case, that the ALJ/Attorney Fee Officer will not act on the petition unless he/she receives notification that the bankruptcy court has lifted the stay or did not release the claimant from the obligation to the representative. Use language similar to the following:

    We have received your petition requesting a fee for the services you performed for (claimant's name). The Social Security Administration has been notified that (claimant's name) has filed a bankruptcy petition. We can not act on your fee petition until the bankruptcy court allows us to do so. Please notify this office or ask your client to notify us of the outcome of the bankruptcy court action.

    Fax the petition and the letter to the representative to the PC using the fax sheet at I-1-2-114(B.)

b. Bankruptcy Court Outcome

  1. Fee Agreements

    • Court Discharges Claimant's Debt to the Representative Take no action on the fee agreement.

      Fax the bankruptcy outcome document to the PC (see I-1-2-114(B.)), if the PC was not the initial receiver, and include the following on the transmittal sheet:

      BANKRUPTCY CASE CONCLUDED

      COURT DISCHARGED CLAIMANT'S DEBT TAKE NO ACTION ON THE FEE AGREEMENT

    • Court Does Not Release or Partially Releases the Claimant From His/Her Obligation to the Representative

      Approve or disapprove the fee agreement following the policy and procedures in I-1-2-12ff., I-1-2-21ff., and I-1-2-31ff.

      Fax the court's action on the bankruptcy proceeding, the fee agreement and order approving or disapproving the agreement to the PC (see I-1-2-114(A.)), and include the following on the transmittal sheet:

      BANKRUPTCY PROCEEDING CONCLUDED

      (ALJ/AAJ) (APPROVED/DISAPPROVED) THE FEE AGREEMENT

      FOR YOUR NECESSARY ACTION

  2. Fee Petitions

    • Court Discharges (Releases) Claimant's Debt to the Representative

      Take no action on the fee petition.

      Fax the petition and the court's action to the PC (see I-1-2-114(B.)), and include the following on the transmittal sheet:

      BANKRUPTCY CASE CONCLUDED

      COURT DISCHARGED CLAIMANT'S DEBT TAKE NO ACTION ON THE FEE PETITION

    • Court Does Not Release or Partially Releases the Claimant From His/Her Obligation to the Representative

      Resume processing the fee petition in accordance with policy and procedures in I-1-2-57ff.

      If the bankruptcy court concludes that the claimant's creditors get some percentage of the debt, the PC will pay the court set percentage of the approved fee to the attorney and release any remaining withheld funds to the claimant.

NOTE:

If the claimant advises SSA that the representative attempted to collect a fee after the bankruptcy court discharged the debt, refer the matter to the Special Counsel Staff. See I-1-2-81.