Monday, February 4, 2013

How our clients pay bankruptcy attorney fees

The most common question that I get from my friends or family members about my job is "if your clients are going into bankruptcy, how the heck do you get paid?" It's a natural question since most people think of someone facing bankruptcy as being financially wiped out. Fortunately we offer our clients several options to make bankruptcy affordable and realistic. The fact is that most of our clients have jobs or other sources of income. If they didn't there likely wouldn't be much reason to file because they don't have income the creditors can garnish.

For chapter 7 cases our office will accept a very small retainer to start working with the client and allow the client to pay us the fees over time. Typically we want to see the client pay the fees in 3-6 months if they need time to pay. During that time our clients will refer all creditors to our office and generally will leave the client alone. Like most attorneys we must receive all attorney fees before a case can be filed. If you owe your chapter 7 attorney money after the case is filed there is conflict issues since your attorney would be a creditor of yours at the time of filing. At a minimum that can make for an awkward situation but more importantly it raises ethical issues when the attorney tries to collect on those fees. Post petition chapter 7 attorney fees are arguably a discharged debt and an attorney may be in violation of bankruptcy laws by collecting those fees. If you are facing a chapter 7 our office can talk to you about options as far as payment plans for the attorney fees and how we can help reduce some stress and phone calls while you work on paying the attorney fees over time. A lot of clients are able to pay the chapter 7 attorney fees once they stop paying their credit cards or other debts that will be discharged in the bankruptcy.

Other ways people pay for chapter 7 fees before filing is to borrow money from family or friends to pay the fees. This is generally acceptable as long as it is a gift, or as long as they understand that the loan is discharged in the bankruptcy. After filing you can pay them back voluntarily, but the bankruptcy discharge would likely relieve you from that loan.  Some clients also pay their fees with a tax refund or other windfall that they anticipate coming in the future. Others may have something they can sell before filing and use those funds to pay for the bankruptcy.  All of these options require some tricky pre-bankruptcy planning so it is best to talk directly with an experienced attorney before doing any of the above things. There are several laws/rules that can trip you up. But a good attorney should be able to help you navigate your way and discuss what the best course of action is.

If you file a Chapter 13 case your attorney fees can be paid out of your monthly payments. The filing fee for a chapter 13 is $281 and the amount of attorney fess will vary based on what attorney you hire. Our firm charges very little or nothing in attorney fees to file a chapter 13 because the Court allows us to get paid our fees through the plan as an administrative expense.

As always our firm offers a free initial consultation to go over all of your options and we can discuss a plan of action to get the fees taken care of and get you out of debt.