(CN) – A New York law firm that helped a client win disability benefits cannot collect $10,000 in attorney fees from the Social Security Administration, the 3rd Circuit ruled.
Binder & Binder represented New Jersey resident Melinda Handel in her bid for disability benefits. She ended up winning $68,150.
The Social Security Administration withheld $4,000 in attorney fees that it paid to Binder, but the law firm challenged that amount as too low.
An administrative law judge upped the amount to $14,000.
Handel later filed for Chapter 7 bankruptcy and listed Binder as an unsecured creditor, wiping out her $10,000 debt for legal fees.
The firm sued Handel and the commissioner of the Social Security Administration in bankruptcy court, demanding the rest of its money. But Binder had no right to Handel’s Social Security benefits under federal law, the bankruptcy judge and district court ruled.
The Philadelphia-based federal appeals court upheld their conclusion that the debt was fully dischargeable by the bankruptcy court.
“Binder’s fee does not represent a direct obligation of the federal government,” wrote U.S. District Judge Louis Pollak, sitting by designation.
“In the absence of a statute or regulation providing otherwise, Binder and the other attorneys remain responsible for protecting their rights regarding the private fee obligations of the claimants they represent.”