Before 2019 paying attorney fees in a Chapter 7 bankruptcy after the case is filed was not allowed by the bankruptcy courts. Here is a 56 minute February 2015 audio of a judge hauling both the attorney and his clients into court over not collecting attorney fees before the case was filed. Thirty of his clients were hauled in for paying his fees after the case was filed. What was happening was the attorney would typically do all the work before the case was filed. If he did this, his fees were discharged in bankruptcy, just like any credit card debt.
Now some law offices will file what we call a skeleton petition so you can get all the benefits immediately. The garnishments stop immediately, the bank attachments end, and the harassments stop because of the automatic stay. The law office does little or no work until after the case is filed. Because the work is done after the case is filed, they can collect after the case is filed. The debt for their work is not discharged because it is done after filing. These law firms advertise this as a zero or no money down bankruptcy. But the cost is higher. Most law firms from 25% more to sometimes charging two to three times more than a standard fee.
No Money Down Attorney Fees in Chapter 7 Bankruptcy
In an emergency, our office can file a no money down case. Instead of costing a client about 1535 to file for a single person, the cost paid over a year will be about 2000 dollars for zero down payments. We are lawyers, not debt collectors or bankers, so the debt is given to a finance company to collect. Shopping for a cheap or low-cost attorney fees in Chapter 7 Bankruptcy often hurts. Advertising a low cost normally means the debtor gets an inexperienced lawyer or poor or lesser service. It can be a discriminatory practice that hurts minority clients.
Cheap Low-Cost Attorney Fees in Chapter 7 Bankruptcy
I know clients are often poor, and they are used to paying over time. But paying court costs or attorney fees after you file draws attention from the judge and the US Trustee. It gives the US Trustee an argument which can be used to force you into a Chapter 13.
The attorney and client are claiming the debtor cannot pay 150 to 200 per month to repay creditors. Then the client pays 200 per month to the attorney after filing. They are essentially lying in a Chapter 7 petition about how they are too poor to repay in Chapter 13. If the client can afford to pay the attorney 175 to 200 a month, he can afford to pay his creditors 175 or more in Chapter 13. The US Trustee and Judge often believe these clients need to be forced into a Chapter 13.
Paying the attorney fees after Chapter 7 is filed, turns the attorney into a creditor. If you have payments after filing, the law office often worries about whether he gets paid instead of worrying about the case and client. If the attorney fees are paid before the plan is filed, then there are none of these ethical problems. Sometimes attorneys will pay themselves and let the case be dismissed for not paying the filing fee.
Chapter 7 Costs
In July 2020, The average Chapter 7 consumer attorney fee in Kentucky was 1400 dollars for a single person and $1600 for a couple. The court filing fee on February 13th, 2015, increased to $335. Clients think attorneys earn whatever the standard fee is from the case. Staff salaries, rent, insurance, software, etc. are costs that reduce what he makes to about $600 for a day’s work on each case. A Chapter 7 should cost about the same as an average refrigerator.
Bankruptcy cases are in federal court. Federal court cases are harder to file than cases in state court and require more work and higher standards. If the attorney does not collect his fee upfront, he adds work to the case because he now has to chase the money down on top of filing the case. As a result, he often does less work in the case if he isn’t paid upfront.
Sometimes attorneys will take less time preparing the petition, disobey the rules, delay doing work and take short cuts if he is not paid in full up-front. We don’t. You don’t want us to. In rare cases, the court will allow indigent debtors and emergency cases to be filed as skeleton petitions. These partially completed petitions often will enable the filing fee to be paid in installments. These and other tactics are commonly used as marketing tools by some attorneys. Studies show low-fee and no money down cases are much more likely to be dismissed or fail. Attorneys that do this pay filing fees last or file the minimum petitions and only complete the work after they are paid. The work is poorly done, finished late, or not at all. Clients often file multiple cases or lose homes.
Saving Attorney Fees
Some consumers may not have learned how to save up for items. They like paying for services after they get them. This always costs them more. If the client doesn’t pay the attorney fee, the attorney often just lets the case be dismissed by not paying the filing fee installment or fails to complete the petition. It means the client may have to file the same case twice. The attorney charges his fee twice. The success rate for our Chapter 7 clients is over 97%. The success rate for attorneys who file skeleton and installment petitions have much lower success rates. Clients suffer as a result. The average petition is 60-80 pages long and takes 2-4 hours to prepare. The typical low-cost skeleton petition in just six pages long and takes 5 minutes to file.
Here again is the February 3rd, 2015, motion hour hearing where a judge spent nearly an hour sanctioning a debtor and his attorney in front of other attorneys. In the end, she sends cases to the US Trustee to investigate both the attorney and the debtors. Several of his cases were subject to being dismissed due to allowing clients to make payments on filing fees or paying attorney fees after he filed the case. To give the client a low price, you can always cut corners and do less work. However, as you can see with some practices, it just makes more work for the client and the attorney and opens you up to having the court look over your petition. Cheap low-cost attorney fees in Chapter 7 Bankruptcy may not be affordable.