Low Cost Bankruptcy Scams
Cheap bankruptcy attorneys are often scams & minority discrimination of the poor
Save yourself some money. If you want to file a bankruptcy with the lowest cost read our book. Several studies show knowing how to file is far more effective at saving money on attorney fees than hiring a cheap bankruptcy attorney. Looking for a cheap Chapter 7 bankruptcy attorney often leads to a fraud on the debtor. Just like there are foreclosure rescue scams there are cheap bankruptcy scams. You need to understand how bankruptcy works to get a bankruptcy filed inexpensively, effectively and so it doesn’t fail. The poor who shop for the cheap attorneys get taken advantage of over and over. The local court requires attorneys be paid prior to filing in a Chapter 7 case. Otherwise attorneys become a creditor. This is an audio of Judge Lloyd sanctioning a younger Louisville attorney and his clients for an hour for billing and collecting from clients after a case was filed.
Scientific Studies show cheap attorneys fees discriminate and target minorities
This page is based on an interesting article from Cathy Moran’s website Bankruptcy Mastery in California. It is also based on a ProPublica study of how expensive bankruptcy is for the poor and minorities and their high failure rates. These reports outlined in The Atlantic show how attorneys who advertise cheap cases discriminate the against poor and minorities. They operate just like buy here pay here car lots. These attorneys target consumers advertising cheap fees. What they are really doing is scamming them so they can file repeated cases at the expense of debtors and creditors.
How it is done
Minorites in an effort to find a cheap Louisville Kentucky bankruptcy attorney often pay far more for their bankruptcy. Minority bankruptcy cases fail 50% more than wealthier debtors. Minorities get far less out of filing bankruptcy. The liens on their homes are not stripped. They fail to complete their bankruptcy cases and fail to get them confirmed. Minorities tend to fail because they don’t understand how bankruptcy works and attempt to do it quick and cheap.
They trust advertising promising no money down filing. What they get is an even more expensive bankruptcy. They get services which doesn’t get it all done. Their cases often end up in complete failure. The case often has to be filed a second or third time. It is often filed as a Chapter 13 when it should have been filed as a 7 All to make the attorney more money.
Chapter 13 or 7
People who look for cheap bankruptcy attorneys are often steered into Chapter 13 cases when the case should have been a 7. Chapter 13 cases are far more expensive in the long run. This may be the fault of the system. But it is often the fault of attorneys who advertise to do a bankruptcy cheaply. Some attorneys target minorities and the poor just like by here pay here car lots. The national results are 66% of Chapter 13 bankruptcy cases fail. When you force the poor into a Chapter 13 when they cant afford it failures skyrocket.
Attorneys who file Chapter 7 skeleton petitions and petitions that pay filing fees in installments have these higher failures. These cheap filings target minorities and the poor with services that are more expensive in the long run. Chapter 7 cases in our office complete the process over 99% of the time.
At some point the debtor may no longer need a Chapter 13 and need a Chapter 7 instead. But what Chapter a debtor files should be based on what the debtor needs. It should not be based on how cheaply they can start a case.
What to look for in a Cheap Louisville Kentucky Bankruptcy Attorney
You never save money shopping for a cheap attorney in a Chapter 13 because the Court pays all the attorneys the same amount. What often happens is the poor and minorities look for no money down filings. When you pay filing fees in installments your case is more likely to be dismissed. It causes more work for the clerks. It brings more attention to your case.
In Chapter 13 there is often a home you are attempting to save. But conditions change. Later on you may want to let it go. You may become unemployed. You may go through a divorce. What happens is often conditions change over time. Chapter 13 cases fail far more often as a result. This is what is happening to thousands of minorities in Chapter 13 cases. They look for the cheapest way to start a case. They do what they can afford not what is right to do. It costs them thousands of dollars.
Minorities and the poor take a chance on the cheap or no money down bankruptcy attorney being quality. What they should do is at least educate themselves. Educated debtors are far more likely to complete their cases and get the results needed. What is proven is cheap isn’t cheap. What is also proven is these debtors and attorneys file the same case a second, third and sometimes a fourth time. These attorneys make money from minorities in cases which fail over and over. These are the very cases the 2005 code changes tried to eliminate.
Sort of like a buy here pay here car lot. The cheap bankruptcy attorney sells what should have been a $1,200 dollar auto for $3,750 to the poor client who could least afford it. The auto fails within 4 months and the debtor has to buy a second case. He should have bought a reliable item all along. What happens is filing costs him far more. It wasn’t filed right the first time or completed properly.
Bankruptcy discourages Chapter 7 cases when it should be used
Studies show there is no excess money for poor families to repay Chapter 13 cases. Cheap attorneys structure fees and the case so a petition is likely to be dismissed. This insures it has to be filed a second time making the attorney a second fee.
In one 2016 case one of our Kentucky Judge lectured an attorney in court for an hour about how his Chapter 7 cases had to be refiled over and over. He filed skeleton petitions and paid filing fees in installments to file the cases cheap. What consistently happened is cases failed and he was paid multiple times. This was always explained as the fault of the debtor for not paying the filing fee. What was happening was the filing fees were paid after he was paid. If there was any default the case was dismissed for not paying the filing fee.
Often the poor have no money to pay a proper attorney. Judges and the law require money to be paid up front to file a Chapter 7. Bankruptcy attorneys can’t do a quality bankruptcy for free. This system tends to shut the door to the bankruptcy court for the poor. And the doors to the bankruptcy courthouse have been closed since 2005.
The history of discrimination since 2005
Since 2005 bankruptcy “reform” has pushed families into Chapter 13 cases and has caused high up front costs for Chapter 7 cases. Bankruptcy petitions are now 60-80 pages long with detailed mathematical formulas. Over 90% of persons who attempt to file prose Chapter 13 cases have their cases dismissed in California within the first couple of months and never even make it to confirmation.
Minorities are steered into Chapter 13 when it has little or no benefit for them. Sure the initial cost is cheap. Often it is marketed to them as the right thing to do Chapter 13 is often sold as Chapter 7 not being available to them although 97% of people qualify for Chapter 7. When a Chapter 13 has benefits it should be used. But often the “cheap” attorney is using skeletal petitions, no money down bankruptcy and advertising to cost the customer more not less.