Deroche

This case presents the question of whether Chapter 7 debtors may recover, pursuant to state statute, attorneys’ fees incurred in bankruptcy discharge litigation. We conclude that attorneys’ fees are not available for litigating federal bankruptcy issues, and we affirm the decision of the district court.

I

Eric and Mary DeRoche (collectively “DeRoche”) filed a joint Chapter 7 bankruptcy petition on November 28, 1994, in the District of Arizona. On December 30, 1994, the Arizona Industrial Commission (“the Commission”) filed what it termed a priority proof of claim, to which DeRoche promptly objected. The Commission sought to recover sums paid to an injured DeRoche employee from the state’s Special Fund, which provides workers compensation benefits to workers who are not covered by workers compensation insurance when they are injured. The amount of the Commission’s claim, initially only $22,421.52, has increased as the injured worker has continued to receive benefits.

On March 17, 1995, the bankruptcy court discharged DeRoche’s debts, except for the pending dispute with the Commission. For the next seven years, the parties litigated various issues related to whether or not the…