Chapter 7. Can a CA lawyer take a referral fee from another lawyer for a bankruptcy referral? Yes? No? Why?

This is a great question. It is true that referral fees are not allowed in bankruptcy. However, to understand the reason you have to back track through quite a few different sections of the Bankruptcy Code in order to find the answer. (If traffic signs were as confusing as the rules governing this question, I'm afraid that very few people would ever find their way to any destination.) However, it is kind of fun, so here we go: Bankruptcy Code Section 504 (Sharing of Compensation), very clearly provides that compensation, (including lawyer fees), may not be shared with any persons outside of one's own firm. The only exception is for fees required to be paid to a bona fide public service attorney referral program operated in accordance with local state law, such as a county bar sponsored referral panel. Section 504 implicates the provisions of Section 503(b)(2), which leads you back the provisions of Section 330, which leads you back to Section 329 of the Bankruptcy Code which which covers any fees paid to a lawyer on behalf of a debtor! Hence, no referral fees. So, there you are, legalized torture. Tell your cousin I said welcome to bankruptcy law.