First, I am going to share with you the wrong way to pay for attorney fees in a Chapter 7 Bankruptcy. Paying attorney fees in a Chapter 7 bankruptcy after the case is filed is not allowed by the bankruptcy court. Here is a 56 minute February 2015 audio of a judge hauling both the attorney and clients into court over not collecting attorney fees before the case was filed. 30 of his clients are now being hauled in for paying his fees after the case was filed. You can shop for cost but cheap low cost attorney fees in Chapter 7 Bankruptcy may hurt. It can be a discriminatory practice which hurts minority clients.
I know clients are poor and used to paying over time. But paying attorney fees after you file draws attention from the judge. It is also the attorney and client 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 200 to 300 a month, he can afford to pay his creditors 200 to 300 in Chapter 13. The US Trustee and Judge 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. He 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
On February 2015 The average Chapter 7 consumer attorney fee in Kentucky was 1200 dollars for a single person and $1400 for a couple. The court filing fee on February 13th, 2015 increased to $335. Clients think attorneys earn $1200 from the case. Staff salaries, rent, insurance, software, etc. are costs which reduce what he makes to about $600 for a days 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 up front, 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 up front.
Sometimes attorneys will take less time preparing the petition, disobey the rules and take short cuts. We don’t. You don’t want us to. In rare cases, the Court will allow very poor debtors and emergency cases to be filed as skeleton petitions. These partially completed petitions often allow the filing fee to be paid in installments. These and other tactics are often used as marketing tools by some attorneys so after the case is filed he can collect money from his clients. Studies show these 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 items 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 and the attorney charges his fee twice. The success rate for our Chapter 7 clients is over 95%. 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 average low cost skeleton petition in just six pages long.
Here is a February 3, 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. Remember cheap low cost attorney fees in Chapter 7 Bankruptcy may not be cheap.