A bankruptcy lawyer is the beneficiaries of a tough economy when it comes to seeking the help of an expert, but their clients, many of whom have scant time to research it and know little about the process, are usually at a loss.
With debtors and desperation mounting, many people pick a bankruptcy lawyer based on an advertised price or, worst of all, no criteria at all. But selecting the right person to handle your bankruptcy can mean the difference between long-term pain and an eventual rebound.
If you are thinking about hiring a lawyer to represent you in the case and to file a bankruptcy petition, you should know about how attorney’s fees are typically handled in bankruptcy.
Contrary to popular myth, bankruptcy fees aren’t set by the court. And although a set fee for bankruptcies charges, others may charge an hourly fee.
Eventually, when payment is due depends, in part, on whether you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Read on to learn about lawyers’ fees in both types of bankruptcy.
You might be able to do the following if you can’t afford to pay a bankruptcy lawyer:
> file your case without an attorney
> get help from a legal aid society or other free legal clinics in your area, or
> find an attorney who will take your case pro bono (free of charge)
File for Bankruptcy on Your Own
You are not required to have a lawyer. Whether it would be in your best interest to hire a lawyer typically depends on:
> whether you are filing for Chapter 7 or Chapter 13 bankruptcy
> how complex your bankruptcy case is
> If you can afford an attorney
> how comfortable you are with studying the necessary legal information and representing yourself
In many cases, if you have little or no income or property, you may be able to file a Chapter 7 bankruptcy on your own. But filing for bankruptcy without an attorney may require conducting extensive research on the rules and procedures, state exemption laws, and national bankruptcy laws of your local bankruptcy court. In addition, you represent yourself at all mandatory hearings and must complete a lengthy set of forms. As said in Nolo’s How to File for Chapter 7 Bankruptcy, by Albin Renauer & Stephen Elias, good place to start is with a comprehensive do-it-yourself manual.
You risk having your case dismissed with no release or losing your property if you don’t enter the effort and time into researching all necessary laws, rules, and procedures.
Complicated Chapter 7 Cases and Chapter 13 Bankruptcy
For those who have a complicated Chapter 7 bankruptcy case or if you are thinking of filing a Chapter 13 case, it’s typically in your best interest to hire an attorney. These kinds of bankruptcy cases have many pitfalls for self-represented debtors (or even inexperienced bankruptcy attorneys) and are a lot harder to successfully complete on your own.
Although you want to file for Chapter 13 bankruptcy and don’t have a lot of money to pay for attorney fees, many lawyers can file your case with a small amount upfront and build the remainder of their fees into your repayment program.
What Are the Average Costs?
Chapter 7 Bankruptcy Lawyer Fees
If you would like to file for Chapter 7, bankruptcy attorneys will base their fees on what other lawyers in the area would charge for a similar bankruptcy case and how complicated your situation is. If you have a good deal of assets or your income is higher than the state median for a similar household, you will typically have to pay more in attorney fees than a person who has no assets.
Attorney’s fees for a Chapter 7 bankruptcy range depending on the complexity of the case. More than a solo practitioner may be charged by larger companies with overhead costs and more advertising. Also, a seasoned lawyer will not generally charge less than an attorney who’s not. But if your situation is a simple Chapter 7 case, you may not need an attorney with years of experience. When shopping around for a bankruptcy lawyer, call at least a few attorneys in your area to compare their fees and if bankruptcy is a place they specialize in and ask and the number of cases they file every month.
Chapter 13 Bankruptcy Lawyer Fees
Most courts have guideline fees that lawyers can charge for a Chapter 13 bankruptcy. Attorneys are not allowed to charge over the court’s rule fee unless it is justified by special circumstances.
Chapter 13 guideline fees are different for each judicial district. However, they are usually between $2,500 and $6,000 depending on whether you are an employee or have your own business. The good thing about Chapter 13 bankruptcy is that you don’t need to pay all attorney fees upfront.
Before filing your case, attorneys will request charge a few preliminary fees and the rest will get paid through your repayment plan. How much a bankruptcy attorney will require upfront depends upon each individual attorney or firm. Before your case is filed, however, on average you can expect to pay about half of the entire fee.
Filing Bankruptcy Without a Lawyer: Should You?
You have probably spent some time studying the price of filing if you’re considering filing a Chapter 7 or a Chapter 13 case without an attorney. No doubt you’re wondering if you might actually have the ability to represent yourself in your bankruptcy case. It is certainly possible to do so. In fact, one recent informal poll found that one out of nine bankruptcy cases is filed pro se (without the aid of an attorney).
Filing for Chapter 7 Bankruptcy Without an Attorney
Bankruptcy laws don’t require you to have a lawyer. Whether you should hire a bankruptcy attorney depends on the complexity of the case and how comfortable you are filing on your own. In general, if you have a simple Chapter 7 bankruptcy case (meaning your income is below the state median, you have little or no property, and your creditors are not likely to allege fraud against you), you have a greater chance of successfully completing your case and obtaining a discharge on your own.
Bear in mind that bankruptcy laws are complex and simple Chapter 7 cases require that you complete extensive forms, research exemption laws and follow all local court rules and procedures. If you’re not willing to put in research and the required time, you risk losing your nonexempt assets or not getting all your debts discharged. As a result, consider using a bankruptcy self-help book if you’re not comfortable filing by yourself and consult with a lawyer.
Filing for Chapter 13 Bankruptcy
Filing for Chapter 13 bankruptcy allows debtors to pay all or a portion of their attorney fees during their repayment plan. You might be able to stretch them out if you can’t afford to pay all attorney fees upfront for Chapter 7 bankruptcy.
But filing for Chapter 13 bankruptcy may not work for everyone. Generally speaking, Chapter 13 bankruptcy is for debtors who can afford to pay back a certain amount of their debts (such as mortgage arrears, car loans, or unsecured debts). You will not qualify if you don’t have enough income to afford your Chapter 13 plan.
Be sure you understand what to look for in a lawyer if you’re looking to hire a bankruptcy lawyer.