How Much Does Bankruptcy Cost?

Prospective clients often ask me “How do I pay you when I am bankrupt?” The cost of filing bankruptcy, and how you get that paid, is a primary concern to virtually everyone who considers bankruptcy.

Attorney fees for filing bankruptcy depend on a number of factors–prevailing rates where you live, the relative complexity of your financial situation, competition among bankruptcy lawyers in your area, and what kind of bankruptcy you are planning to file. Most bankruptcy practitioners charge on a flat fee basis, with the fee designed to cover the work that is usually necessary in such cases. Additional fees may be charged for non-standard work. My practice is to get some preliminary information from a prospective client, so that I have an idea of the amount of work that will be involved in the case, and set a flat fee at that point. That seems to be the prevailing procedure followed by most attorneys practicing in my region.  No two cases are alike, and they vary in complexity so much that a one-size-fits-all approach just doesn’t work.

The amount of attorney fees and how to pay them is a key issue to anyone considering bankruptcy.  A huge majority of people who call me to inquire about bankruptcy ask that question first, and I understand the reason.  Why waste your time and mine if you can’t afford the fees?  No one wants to hear “it depends.”  But the only way I can set a fee that is fair to you is to talk to you a little first.  I need to know what your situation is, and what kind of bankruptcy is going to fit your needs, before I can quote a fee.

You can get some great advice on how to choose a bankruptcy attorney here.  You should also bear in mind that hiring a lawyer is one example of getting what you pay for.  Most attorney fees are based, at least in part, on the experience of the lawyer.  An experienced attorney will be also able to estimate the amount of work that your case requires, and will charge you accordingly.  Obviously, you don’t want to pay a fee based on more work than is necessary in your case.  On the other hand, if an attorney is charging you too little, is he really going to be available to answer your questions and help you through the process?  Recently a prospective client told me he had seen another lawyer, whose fees were lower than mine, and asked me to match the lower quote.  I explained why I did not think that would adequately compensate me for the work required, and he asked “Don’t you want to be competitive?”  My reply was that I’d rather be competent.
When I meet with a prospective client and quote a fee, I can often make suggestions about how to pay the fees.  After discussing the client’s goals, I may be able to advise how to budget for payment of fees, or which assets should be used to pay fees.  In most cases, I will allow a client to pay in installments, but that delays filing a case.  I can also identify those clients who qualify for assistance through legal aid, or through a program of the South Carolina Bar that finds volunteer attorneys to handle cases for no fee.

Once you decide on which attorney to hire, and he has quoted a fee, you should also be given a written fee agreement that sets out the kind of case to be filed, the fees to be paid, and what those fees cover.  The fee agreement should probably also specify the type of work not covered by the initial fee, and how additional charges will be determined.   Attorneys are required to disclose to the court the fees that you have paid or have promised to pay.  If that disclosure does not match what you have paid, you should ask your attorney to explain, and if necessary, correct, the discrepancy.

For most people in financial distress, paying attorney fees for bankruptcy is a big deal.  But, instead of looking at it as another bill to be paid, think of it this way.  If someone told you that you could settle all your debt for a one-time payment of the same amount, you’d probably think it was a very good deal.  Bottom line, that’s what you’re buying when you pay those attorney fees.