Bankruptcy Attorney’s Fees in Chapter 7 and Chapter 13

Chapter 7

Chapter 7 is a short procedure.  Also called a straight bankruptcy, it lasts about 4 months.  You pay for it in advance to your attorney via cash, check or money order.  I no longer take checks. I’ve learned something: Every time a client  makes the effort to tell me that his check is good, it isn’t.  And that’s the case so far, every single time that a client has told me that.  So most of us won’t ever take a check.

Reasonable Fees

Sometimes your bankruptcy will cost a pretty penny even with me.  Whether you file in Riverside, San Diego, Santa Ana or Los Angeles, whether you live in Murrieta, Temecula, Menifee, Wildomar, Lake Elsinore, or Canyon Lake, I’m nearby and my fees are reasonable.  I aim to keep things affordable by basing my fees on your income.  If you’re on social security disability my current fees are $800 + the Filing Fee for a chapter 7.

Higher fees are what you will usually find with the other guys.  If your attorney has a big expensive office or several names on the door, you’re going to pay more.  Sometimes that’s what you want, if you’ve committed fraud or basically if you’ve cheated a few people or banks out of money, then you may want a law firm with that kind of litigation support.  However, remember that defending against creditors that you cheated out of money is going to cost you a lot extra, so having a higher priced firm might be a bad idea. If you cannot afford to defend yourself for your misdeeds then if you get sued, you’re going to lose no matter who your attorney is, because we don’t defend those for free.

And if you’re just a regular person who got caught in bad circumstances such as a divorce, medical emergency, death in the family, your company closed etc, then a boutique firm is probably going to be a better option.  However, attorney’s fees in any bankruptcy case must be reasonable.

Within the bankruptcy petition, the fees must be disclosed on two different forms.  If the fees disclosed are not reasonable the bankruptcy trustee assigned to your case is supposed to ask your attorney about it.  Make sure as you review your petition that the fees disclosed match the fees you paid.  If they don’t, you might bring it up to your bankruptcy trustee at the hearing.  If for instance your attorney charged you $4000 for a chapter 7 bankruptcy then listed that he’s charged you only $2500, then he’s trying to hide the actual fees from the bankruptcy trustee.  If he says he’s charged you $700 when he charged you $900 it’s an insignificant typo.  Don’t sweat it.

Fees in California must be not “Unconscionable” which basically means something to the effect of does the fee charged shock the conscience of the court.  But in Bankruptcy, the fees must be reasonable even in California.  This is a safeguard for you to protect you from unscrupulous attorneys.

UNPAID Attorney’s Fees

Listen, this is my favorite issue:  If at time of filing of your Chapter 7 bankruptcy, there are any unpaid attorney‘s fees, they are added to your credit card balances and are discharged. From the moment of filing your attorney can never ask you to pay your balance of attorney’s fees ever again. Your attorney knows that of course, better than anyone, and therefore your attorney can never ask for you to ever pay your fees ever. Never, never, never.  Is that enough Nevers yet?

If he does you can most likely get the bankruptcy judge to order your attorney to pay you punitive damages.  See In Re Waldo, 417 B.R. 854 (Bankr. E.D. Tenn., 2009) and this Article. So, if an attorney suggested filing your Chapter 7 case without paying any attorney‘s fees prior to filing the case, take it.  If he then asks you to pay your attorney‘s fees after filing your case, let me know, and I’ll sue him for you, where he will lose and he will pay my attorney‘s fees to sue him and he may also be required to pay you punitive damages.  

Chapter 13

In Chapter 13 instead of a straight bankruptcy you are in a Chapter 13 reorganization plan where you pay a portion of your debts back usually over a 3 to 5 year period.  For attorney‘s fees you pay a down payment to your attorney via cash, check or money order, it could be as little as the filing fee, but could more.  I’ve seen a case where an attorney takes only $75 against the filing fee then he asks the court to allow you to pay your filing fee in installment payments.  Personally, I find that odd because if you can’t afford to pay even the filing fee how are you going to pay your chapter 13 plan payments?I usually charge as up front fees the same amount as a chapter 7 and of course you must also pay the filing fee for the chapter 13 prior to filing the case.  The balance of the $4000 in attorney‘s fees (standard for a chapter 13) are paid through the monthly payment plan.  So, if you put down $1000 plus the fling fee then the other $3000 would be divided by 60 months and added to your monthly payment.

These are Rare But I have Seen Them Happen

Often attorneys who have no morals will put you into a payment plan type bankruptcy, or chapter 13 when you cannot afford to pay your attorney‘s fees prior to filing the case.  That way they get more attorney‘s fees out of you.  It’s an Up-Sell to a chapter 13.  You cannot afford the $1000 or $1200 for a chapter 7 but your house is about to be foreclosed or your wages are about to be garnished or your bank account is about to be taken by a creditor called a bank levy.  Rather than suggesting you sell something or borrow from your mom, he just charges you the filing fee for a chapter 13, and presto your case is filed.  Your bankruptcy protection is started.

Is it just to get you to pay the $4000 in attorney‘s rather than the closer to  $1000 for a chapter 7?  Sometimes yes.  But if you easily qualify for a chapter 7 then filing a 13 is a disservice to you because you will not be able to sustain the plan payment in the long run, not even a little one, and then you’ll be wishing for a chapter 7 anyway.  Then he can charge you to convert your bankruptcy case to a chapter 7 and get coming and going.

I’ve met clients of an attorney who actually told people that their county, San Bernardino, only allowed a minimal amount of rent on the chapter 7 qualification test (means test) as an expense regardless of family size and that therefore those 4 clients could not file a chapter 7.  I went to the US Trustee’s Main Office in Riverside and told them so because this is patently false.  The housing expense in the means test increases as your family size increases in every state and county in the country.There was another attorney who told an old lady from Menifee that she could pay her attorney‘s fees after the case had been filed.  She paid her filing fee but after her case was over she could still not afford to pay.  So, that attorney’s paralegal called her and told her that her bankruptcy Trustee was going to reopen the case and start investigating assets again, however, the paralegal continued, the little old lady’s attorney could make it go away if the little old lady would just pay him $1000 in cash by the following Tuesday.So I telephoned her bankruptcy Trustee and found out that it was all a lie and that her bankruptcy trustee had not even contacted the attorney.  I suggested that the little old lady turn him in to bar, her bankruptcy Trustee, the US Trustee’s Office and to write a letter to the judge assigned to her case.  She did.

I’ve also seen attorneys who would file an emergency filing or “bare bones” case for you real cheap. When you do that you must within 14 days file the balance of the schedules and statements i.e. the pages of the petition which explain who your creditors are and what your income and expenses are and if you pass the means test or not.  So, what the attorneys did was to charge you a mere pittance to file the emergency case but an arm and a leg to file the balance of schedules.  The emergency case was $200 plus the filing fee but the balance of schedules was another $3500, and you’re over a barrel, you must file the balance or your case will be dismissed by the court.  

I recently saw a case where a client’s bankruptcy attorney was suspended by the California bar during their chapter 13 and they didn’t even get notified by their attorney.  They went to that attorney‘s former office and found out about it.  The new attorney working in the office offered to take over the case for $500 which they were supposed to pay to that attorney.  However, in a chapter 13, only the initial payment of attorney‘s fees is ever paid directly to the attorney by the client.  After that, no fees get paid without court approval.  I told them that.  They went back to that attorney in Temecula and that attorney “just stared at me blank faced”.  Once a chapter 13 plan is confirmed by a bankruptcy court judge, you can never accept any fees directly from the client without a court order.  Then the bankruptcy trustee on your chapter 13 case pays those attorney‘s fees to your attorney through the chapter 13 plan as a plan distribution.  

If you have any other concerns, questions or comments please write back back in the comments section below.

Lake Elsinore Chapter 13 Bankruptcy

A Chapter 13 Bankruptcy can make it possible for you to hold on to your Lake Elsinore real estate. Did you know that rather than losing your home in a foreclosure or short sale there is a better plan?  If you’ve been out of work for a while and recently started working again, and if you’re behind on your house payments, a chapter 13 bankruptcy may be the right plan for you. 

If the mortgage company won’t give you enough time to pay off the missed payments and if it won’t give you a loan modification, then ask yourself, can you pay the regular mortgage payments if they’d just let you?  Do you owe credit cards or have a high car payment?  Because if you could pay the mortgage payment if they would just let you and if you could reduce your car payment and slash your credit card payments, then those payments could be used to pay off the missed house payments over 5 years at 0% interest.

You can restructure all of your debt including your mortgages, and with this strategic move you can get your life back. Meeting with the attorney will take less time than fitting all those game pieces together from the grocery store to see if you won the million dollars. The difference is you never win at those games, even after all of the money you’ve spent.

Unlike the lottery, you always win with a Lake Elsinore Chapter 13 Bankruptcy. 13 is your lucky number.  If you haven’t been a Bankruptcy Attorney for the past 17 years, you will probably not be skillful enough to carefully fit your financial circumstances together with the complicated Chapter 13 Bankruptcy rules. You need expert help. 

Putting your head in the sand is the easy way out, but things will not get better while waiting things out. You need to get in there to speak with the Attorney while there is still time to actually help you.  He will give you different strategies because he can see things in a way that you can’t. He has helped thousands of people with their bankruptcies already so he won’t be experimenting on you to “see if this might work”.

Who you choose as your attorney matters.  You wouldn’t go to a dermatologist for brain surgery. So don’t go to your uncle’s divorce lawyer for a bankruptcy.  Don’t go to your sister’s car accident attorney reorganize and consolidate your debts.  Mr. Nelson has done Bankruptcy for the entire existence of his practice, he didn’t just try a few cases out for the first time when the economy went sour.

Lots of Attorneys have come at the last minute from other areas of practice such as family law, business planning and construction defect.  Trying their hand at doing Bankruptcy because people with no home equity and no 401k left have no money to pay a divorce lawyer and less need to see one.  Not only has Mr. Nelson been a bankruptcy attorney since 1994, he lived in Tuscany Hills in Lake Elsinore for two years and knows the area.  Knows what the properties are worth.

Chapter 13 Bankruptcy could even make it possible to remove your second mortgage from your home while still holding on to ownership of your property. You want to keep your car and your things while at the same time getting rid of a ton of your debt.  So call to speak with the Attorney to hear about your options. It’s how to “Get Your Life Back”. Remember, faith and fear cannot exist together at the same time, call 951-200-3613 to see Mr. Nelson so you can stop worrying. 

Reaffirmation Agreements

REAFFIRMATION AGREEMENTS

A Reaffirmation Agreement is a new promissory note to keep paying on an old contract for the purchase of goods where the lender can repossess or foreclose the goods.  Because you have signed a security agreement the lender has the right to repossess or foreclose if you do not pay for it.

Chapter 7 bankruptcy discharges your personal obligation to pay the loan, or in other words, you no longer have to legally pay on the note.  However, the lender still has a lien on the object(s) in question. Jewelry, refrigerators or large appliances, and most notably cars can be repossessed in this way.

What a reaffirmation agreement does: It allows you and the lender to agree that you may keep the goods so long as you continue to pay for them.  When executing a reaffirmation agreement with the lender sometimes the lender will reduce the balance owing, the interest rate or both.  As a result the payment and term can be reduced.

Nowadays most lenders will not reduce the interest rates and balances on cars.  Home mortgages never do.  You can often reduce the balance and interest rates on appliances, jewelry, computers and motorcycles.

If you do sign a reaffirmation agreement, you will have 60 days to change your mind and rescind it.  Rescissions must be in writing, served on the creditor and preferably filed with the court.

MORTGAGES

You would never reaffirm a mortgage.  Never.  Seldom but sometimes a mortgage lender will tell a client that the client’s post bankruptcy mortgage account would show up as good credit on their credit report if the client had just done a reaffirmation agreement.  It’s all the bankruptcy attorney’s fault that the client’s credit is not better than it is right now because he didn’t tell the poor client to reaffirm the mortgage.

Most mortgage companies will not do this to you, just a few.  Ones that do are unscrupulous and are aiming to get you to sign your life away.  They want you tied to that mortgage through the reaffirmation agreement come hell or high water.  If they can just do that, then if you foreclose, maybe they can sue you.  If you are in a worse position later, maybe you have to short sell, and when you do, they will ask you to pay them back sometimes, $10,000 to $50,000 in order for them to approve the short sale.

No, we don’t know what will happen, but I have a client right now who is being sued by a lender, his former first mortgage, who asked him to sign just such a promissory note in order to approve his short sale.  Fortunately for him, he did not do a reaffirmation on his mortgage during his bankruptcy.  Therefore, his mortgage company cannot in fact stick him with the debt, but for some reason they think that they can.  Wrong, they cannot.  We will be suing them soon for violating the Bankruptcy Discharge Order.

Because we do not have a crystal ball, and because the length of the term of a mortgage is so long, we NEVER sign a reaffirmation agreement on a mortgage.  This is the industry standard.

CARS AND VEHICLES

Legally, WITHOUT a reaffirmation agreement the lender can repossess your car, even if the car payments are current.  However, at this writing, the only companies who do are Ford Motor Credit & Jaguar Credit & California Coast Credit Union.   I cannot promise that other companies will not change their policies and begin behaving like Ford.

WITH a reaffirmation agreement, as long as the payments are current, then they cannot take the car just as before the bankruptcy.  However, just as before the bankruptcy, if you get behind in payments they will take the car AND sue you for a deficiency balance.

If you get behind, WITH or WITHOUT a reaffirmation agreement, they will definitely repossess the car.  So, the thing to do is to ask yourself, is the economy getting better or worse?  Answer:  Worse, my business is constantly picking up.  Everyone who comes in tells me that the business they work for is dropping off.  Fewer orders, fewer sales, employees are being let go.

So, if you just keep making the payments and don’t worry about it, you have a great probability of nothing changing, and eventually once the vehicle is paid off, they will still have to give you the pink slip.

If you sign and file a reaffirmation agreement, and then change your mind, you have 60 days to do so in writing and it must be in writing, signed and filed with the court.

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Bankruptcy Attorney David Nelson

Temecula Bankruptcy Attorney David NelsonTEMECULA BANKRUPTCY ATTORNEY DAVID NELSON

I have been a Bankruptcy Attorney since the very beginning. Having graduated in the top 15% of my class I passed bar the first time and in June of 1994 I opened my law office.  Back then there was a recession and it was just natural to open a bankruptcy practice.  I saw a need and was able to fill it.

I’m an expert in the field of bankruptcy.  Since 1994, I have been passionate about getting my clients out of the troubles they find themselves in.  Certainly many of us might think that if we’d just planned better, we would have been able to avoid the challenges facing the country right now.  While it might be true, it’s probably more accurate to say that there was no way to plan our way out of the whole economy crashing down on us.

I’ve seen first hand the blessing that Bankruptcy can bring to individuals and families.  Think about this for a moment:  What is it that you fight about the most?  Is it too much money, “Dang what are we going to do with all these 20s honey?”  No, it’s the lack of money.

But what if we could cut the arguments in half?  What if we could at least take the arguments from: which debts do we pay this month with the little bit of money we have? and transform those to: how do we set up a savings for the little that we have?  That’s what Bankruptcy can do for you.

If you could start the day knowing that your credit cards, medical bills, repossessed cars, 2nd mortgages, and so on were all going to just disappear, how would you feel the rest of the day?

Wouldn’t you treat your spouse better?  Wouldn’t you be kinder to your children and co-workers?  Wouldn’t you have a better marriage, family, career?

I’ve probably saved more marriages than most marriage counselors over the same time period. You don’t need to know how to talk to each other about money, you must do something about it.

What if you could go back to paying your tithing or your favorite charity again?

Do something about it.  Make the Call Right now to set the Appointment that will change your lives.  Call 800 FILE AWAY or 800 345 3292, call right now.

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