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*This outline is adapted from Chapter 27, Ethical Responsibilities,
Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)
right to require disgorgement by DIP counsel of nonestate funds, even if paid by the debtor, for services unrelated to the bankruptcy case.177 And pre-bankruptcy payment for non-bankruptcy work is not subject to disgorgement, as long as there is no preference.178 While bankruptcy fee payment by a third party guarantor must be disclosed and the guaranty arrangement approved, some courts have held that fee applications need not be filed before the guarantor pays;179 others require such applications.180 An agreement by creditors to pay bonuses based on an examiner's results must be disclosed, and may render the examiner no longer disinterested.181 A success fee for assistance to certain creditors may be held payable from those creditors' recovery alone.182
9. Courts are divided on disqualifying DIP counsel due to nonbankruptcy related unpaid prepetition fees. Most -- including all circuit courts -- strictly construe Section 327(a) to mandate disqualification as a creditor.183
