Personality and professionalism matter, and like anyone a lawyer who appears terrific on paper can fall short in person. It’s critical that you trust that the person you hire will be working in your best interest. Look for the following three qualities during your consultation.
They discuss alternate resolutions: Chapter 7, a complete cancellation of eligible debts, might not be the best or only way to deal with your financial problems. If there are other options, an ethical lawyer will present them. Another suggestion might be a credit counselor’s formal debt management plan, especially if most of your lenders are credit card companies. The interest rate reduction the agency may be able to secure can translate into lower payments. Chapter 13 bankruptcy, a court-supervised payment arrangement, might also be on the table. A lawyer may recommend it if you have enough income to support at least some of your liabilities and own property that could be taken in a Chapter 7 or a lawsuit. Understanding the full menu of resolutions and then choosing from them reduces the possibility that you will regret making the decision to file for bankruptcy.
They display a passion for the process: You wouldn’t have a heart operation performed by a indifferent surgeon, nor would you want the person representing you in bankruptcy court to be distant or aloof. Therefore, the lawyer you’re considering should exude a genuine passion for the occupation and process. Find out why he or she chose to specialize in bankruptcy law. Listen carefully to the response. Many lawyers find the work fascinating and rewarding.
They hear and understand you: For most people, declaring bankruptcy is a painful decision. Because of the emotions involved, you’ll want your attorney to not just to have the proper credentials, but to exhibit a desire to understand your specific situation and goals. Your lawyer should possess empathy and a willingness to take the time to ask probing (sometimes difficult) questions. “Only hire someone who wants to know what led to your financial predicament.” “Someone who will can address what your biggest worries are.” Not all lawyers have great bedside (or courtside) manners, so after the meeting, ask yourself if you’re truly comfortable with that person and if all of your concerns were addressed. If you feel like a number rather than an individual, cross that lawyer off your list and move on to the next until you find one who treats you with some respect.
A fee commensurate with service
Lawyers, even those who help you not pay your creditors, aren’t free. The cost varies by complexity and location, but in general is between $800 and $2,500 from start to finish. Avoid ultra-low-rate bankruptcy mills that advertise heavily and crank out the cases. “They usually only have a few lawyers and a large number of legal assistants.” “For a simple run-of-the-mill case, they’re probably ok, but you don’t know when complications may arise. The first time you meet with your lawyer would be at the creditors meeting, and if there is a problem, they won’t be prepared to handle it properly.” Don’t presume you get more for hiring the most expensive lawyer on the block, however, or less if you scrape the bottom of the price barrel. “Fees are determined by the market.” “In some areas, caps are set by the courts. This means that, for the same price, the client can usually get an experienced, highly qualified lawyer for the same price as a novice.” Be sure to ask what it covers, though, as some attorneys include court and other costs in the quoted fee, others don’t. Once you’ve found the person who possesses the ideal combination of experience, character and cost, you’re set. If you choose to move forward with filing, you can do so with assurance that you’re working with a lawyer you can trust.
In a bankruptcy proceeding, the debtor and the court figure out a plan to repay creditors as much as possible. In exchange, the debtor is released from legal liability for the rest of the debt that he owes. The remaining debt is discharged and the debtor is not legally responsible for paying the debt.
Are Attorney’s Fees Dischargeable?
In personal bankruptcy, most debts are dischargeable even unpaid attorney’s fees. Section 523 of the Bankruptcy Code lists fees that are not dischargeable. They include child support, alimony, debt that was incurred through fraud or false pretenses, luxury items bought right before the bankruptcy, government education loans, medical costs from driving drunk, reckless failure to pay debts, court fees, and other court costs. Since the current bankruptcy attorney’s fees are included in court costs, she will get paid. In contrast, attorneys that the debtor hired prior to bankruptcy will probably not get paid. Often, attorneys with unpaid legal fees will lodge a complaint with the Bankruptcy Court, claiming that their fees were non-dischargeable. However, these claims usually fail because they run counter to the purpose of bankruptcy, which is to give the debtor a new economic start. In response to this, attorneys are now anticipating their clients’ bankruptcies. Attorneys now routinely maximize their “retainer” (down payment) and encourage clients to file bankruptcy before legal services are rendered.
What If I Filed for Bankruptcy after a Divorce?
Family law practitioners, in particular, often run into problems when their clients file for bankruptcy immediately after divorce. Family lawyers have frequently argued that their fees are non-dischargeable, because they help the client to fulfill the duty to support the child, which is itself non-dischargeable. The BAPCPA, a bankruptcy law that went into effect in October 2005, made the law even stricter regarding the non-dischargeability of family support obligations. However, courts rule that if attorney’s fees were not ordered to be paid in the original child support decision, then they are dischargeable in subsequent bankruptcy. Attorney’s fees are not alimony. Although attorney’s fees help collect spousal support, they do not go into a spouse’s pocket. Finally, there is no justification for favoring family lawyers above other lawyers who might be owed even greater sums of money.
Can I Discharge Fees or Fines Imposed By the Court?
The answer is typically no, you cannot discharge fees imposed by the court. Fines and other fees imposed by the legal system are designed to punish citizens who break the law. It would be unfair to punish some citizens and not other citizens simply because they can’t afford the penalty. The only possible exception is if the fine or fee given is not retributive or punitive in nature. In personal injury lawsuits, for instance, the damage award taken from the defendant is not meant to punish the defendant, but to restore what was lost to the victim.
Do I Need a Bankruptcy Lawyer?
Filing for bankruptcy is a very complicated process. The law varies depending on where a bankruptcy is filed and also depends on which type of bankruptcy is filed. A bankruptcy lawyer knows the particulars of filing for bankruptcy, can recommend what chapter of bankruptcy is right for you, and can ensure that your paperwork is filed correctly so that all eligible debts are discharged.
Flat Fees Versus Hourly Fees
Many attorneys, especially bankruptcy attorneys, will charge a “flat rate” to represent you in a bankruptcy case. You’ll pay a fixed amount for the attorney to represent you, regardless of the amount of time the attorney spends on your case. Other attorneys will charge you an hourly rate, although it’s uncommon in consumer bankruptcy cases.
The more likely scenario is for the attorney to charge a flat fee for the bulk of the matter. The lawyer will charge an hourly fee for any extra work required for services like defending against an objection to discharge. Your contract should spell out what the flat fee covers.
Average Chapter 7 Bankruptcy Attorney Fees
Most Chapter 7 bankruptcy attorneys will base their fees on how complicated your case is and what other attorneys in the area would charge for a similar bankruptcy. If you have a lot of assets or debt, you might pay more than an unemployed person with no assets. In general, attorney fees for a Chapter 7 bankruptcy range from $1,000 to $3,500 depending on the complexity of the case. Larger firms with more advertising and overhead costs sometimes charge more than a solo practitioner, but not always. Some larger operations offer low fees and count on a higher volume of cases. Also, you might find a solo practitioner will cost more but offer more personalized service. It will depend on the office. You can expect a newer attorney to charge less than a more experienced lawyer, and if your case is a simple Chapter 7, you might not need an attorney with years of experience. Keep in mind, however, that bankruptcy is a specialized area of law and that most attorneys who don’t regularly practice bankruptcy won’t accept a bankruptcy case. When shopping around for a bankruptcy lawyer, call at least a few attorneys in your area. Compare their fees and ask if bankruptcy is an area they specialize in, as well as the number of cases they file each month.
Paying a Chapter 7 Attorney
You’ll pay your Chapter 7 attorneys’ fees in full before the attorney files the case and with good reason. Chapter 7 wipes out most unsecured debt in a Chapter 7 case, including attorneys’ fees. So if you had a balance due when filing the matter, it would get discharged. Chapter 7 attorneys know this, of course, and require full payment.
Average Chapter 13 Bankruptcy Attorney Fees
Most courts have guideline “acceptable” fees for a Chapter 13 bankruptcy. Unless exceptional circumstances justify it, an attorney won’t be allowed to charge more than the court’s guideline fee. Chapter 13 guideline fees are different for each judicial district. However, they are typically between $2,500 and $6,000 depending on the complexity of the case. For instance, if you own a business, the case will likely require more work and justify a higher fee.
Paying a Chapter 13 Attorney
Fortunately, most attorneys don’t require you to pay the entire Chapter 13 bankruptcy fee upfront. In most cases, attorneys will ask for a portion of their fees before filing your matter, and the remainder will get paid through your Chapter 13 repayment plan. How much a bankruptcy lawyer will require before filing will depend on each attorney or firm. But on average, you can expect to pay about half of the total fee before the attorney files your case.
Lawyers Must Disclose Attorneys’ Fees to the Court
Attorneys’ fees in bankruptcy cases are somewhat unusual in that they must be disclosed to and approved by the court. However, this doesn’t mean that the bankruptcy court fixes the amount that attorneys can charge in bankruptcy cases. Attorneys are free to charge what is reasonable given their experience and the complexity of your case subject to review by the court. Some courts have a “presumptive” maximum fee for certain types of bankruptcy cases, but the attorney can overcome the ceiling by demonstrating a good reason for charging more.
Attorneys’ Fees, Court Costs, and More
When you hire an attorney to represent you in bankruptcy, you should plan to pay three amounts:
• the attorneys’ fees the lawyer charges to advise you, complete your bankruptcy paperwork, and represent you at bankruptcy hearings
• the bankruptcy filing fee you’ll pay to the court to file the bankruptcy paperwork, and
• the cost of a pre-bankruptcy credit counseling course.
Many people can pay the court’s Chapter 7 filing fee in up to four installment payments, and some get the court fees waived. By contrast, you’ll have to pay the court fees for a Chapter 13 case at the time of filing.
Choosing Between Debt Consolidation or Bankruptcy
If you’re like most folks who carry multiple credit cards, the merry go round of payments is a monthly frustration and chances are good you’ll eventually face problems making your deadlines. Nearly half of Utah’s households carry a balance from month-to-month and the amount they owe is growing. The average family that carries a balance owes $15,094 in credit card debt, which helps explain why the Federal Reserve said card debt hit a record $870 billion at the start of 2019.
Delinquencies – payments that are more than 90 days late also rose to 3.22% at the end of 2018 and the credit reports of about 37 million cardholders were dinged because of it. If you’re one of the dinged, it might be time to get brutally honest with yourself. You’ll need to ponder if you have enough income to fund a debt consolidation plan or whether your finances are so out of whack that the only alternative is to surrender and file bankruptcy. Struggling with debt is a juggling act and dropping the ball can have serious consequences. Before you decide how to approach your situation, it’s a good idea to take stock. You may have multiple unpaid credit card balances, a student loan and a home loan, each requiring either a fixed or minimum monthly payment. Make a list of them all and include the balance owed, the required monthly payment and the interest rate. Add up your minimum monthly payments. This exercise will give you a sense of your situation. Though there are assortments of techniques to reduce debt and make it more manageable, debt consolidation and bankruptcy are two of the most common.
Debt consolidation, which could be accomplished through a nonprofit credit counselor, turns an assortment of unsecured credit card debts into a single, affordable monthly payment that eliminates debt in 3-5 years. The alternative, bankruptcy, seeks court protection from creditors and can either discharge debt or reduce it with a payment plan that can take up to five years to complete.
Debt consolidation is a strategy to reduce the interest rate and lower the monthly payment on credit card bills by combining them into a single payment.
There are several ways to accomplish this, including:
• Enrolling in a credit consolidation program through a nonprofit credit counseling agency. The agency will collect monthly payments from you that include a service fee and pay off your creditors in an agreed upon amount until the debt is eliminated.
• Taking out a debt consolidation loan through a bank, credit union or online lender. Typically, there are fees associated with the loan and your credit score will influence the interest rate. If you don’t have at least a good credit score something above 650 – that interest rate may not be much better than what you’re paying on your credit cards.
• Taking a do-it-yourself approach by contacting your card companies and offering to repay them at a lower interest rate. Creditors don’t have to accept your terms.
Before attempting this, it’s wise to research tactics and techniques, considering the pros and cons. You can use a nonprofit credit counselor to guide you through the process and offer suggestions.
Pros of Debt Consolidation
Whether you use a nonprofit credit counseling agency or go it alone, the objective is to turn an assortment of bills into a single monthly payment. If the consolidation loan or debt management program has a lower interest rate than the original debt, you can save money and lower payments. Using debt consolidation will maintain your access to credit and if your plan is successful, your credit score should improve.
Cons of Debt Consolidation
Trying to arrange your own repayment plan usually requires a solid credit score. Whatever type of debt consolidation loan you pursue, a good credit score is usually necessary for approval. The higher your score, the lower your interest rate is likely to be. Also remember that paying off a consolidated debt could take several years and will require that you force yourself to rein in spending, especially credit card spending. Finally, before paying off unsecured credit card debt with a home equity loan or line of credit, remember that you’re putting your home at risk. If you don’t make payments on time, the lender could foreclose on your home.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506