A creditor that took over a BB&T loan after the borrower declared bankruptcy can seek to recover attorney’s fees it incurred after the filing.

The Feb. 8 opinion by Judge Pamela Harris of the U.S. Court of Appeals for the Fourth Circuit takes the same approach as other appeals courts on a question where bankruptcy and district courts have disagreed.

Ollie Faison borrowed $2.1 million from Branch Banking and Trust Co. (BB&T) between 2003 and 2012 and secured the loans with his North Carolina farmland. Faison filed Chapter 11 in 2014, seeking to reorganize his debts and BB&T later assigned its claims to SummitBridge National Investments III, LLC.

The loan documents provided that if the creditor used an attorney to recover money, it could recover reasonable fees for the effort.

Before unsecured creditors are paid through a bankruptcy, secured creditors are allowed to recover at least the value of the collateral securing their debts.

SummitBridge Paid $1.7 Million

Faison’s court-approved bankruptcy plan agreed to pay SummitBridge about $1.7 million—what the farmland was worth—an amount that covered the loan principal and pre-bankruptcy interest plus some post-petition interest and attorneys’ fees, the court said.

The plan said that SummitBridge could file an unsecured claim for remaining attorneys’ fees not covered by the farmland’s value, which the company did.

Faison objected to the claim, saying that claims are determined at the time of the bankruptcy filing. No fees earned post-filing existed at the filing date, he argued.

The bankruptcy court and then the district court on appeal agreed with Faison that SummitBridge can’t state an unsecured claim for attorneys’ fees that were earned after the bankruptcy was filed.

But the Fourth Circuit disagreed. It aligned itself with decisions in the Second and Ninth Circuit and found that there’s no basis in the bankruptcy code to bar such a claim.

It said that as of the bankruptcy filing date, the bank had a contingent right to assert a claim for attorneys’ fees, so it wasn’t necessary that the fees already be incurred.

Judge Henry F. Floyd of the Fourth Circuit and Donald Coggins Jr., a South Carolina district judge sitting by designation, joined in the opinion.

SummitBridge was represented by Buchanan Ingersoll & Rooney PC, and Faison was represented by Northen Blue LLP.

The case is SummitBridge Nat’l Inv. III, LLC v. Faison, 4th Cir. App., 17-2441, 2/8/19.