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