When it comes to payment plans for Chapter 7 cases, all fees and costs must be paid before the case is filed. At first glance, this may disappoint you, but most people it’s not a problem. The payment plan period usually overlaps with the pre-filing process. In other words, you and your lawyer need time to prepare your case for a successful filing. This work is done along side the payment plan. Once the payments are made and the work is completed, the case is filed. This usually works fine for people unless they have an unusual emergency (beyond just being subject to calls and normal debt lawsuits). In those cases, a payment plan will not work well, and it will be necessary to pay for a Chapter 7 case quickly.
Many lawyers would like to be able to file a Chapter 7 cases before cases were completed, but this is illegal. If an attorney extends a payment plan into the period after a Chapter 7 is filed, he or she is breaking the law. This is because unpaid, pre-filing fees cannot be collected after a Chapter 7 case is filed due to the automatic stay (and later the discharge injunction). Any bankruptcy lawyer who would consider offering an illegal payment plan is either ignorant about basic bankruptcy law or is playing fast and loose with the rules. In either case, you do not want to deal with someone like this. In general, the Court will not excuse you from the law just because you were following the advice of an unethical lawyer.
Nicholas Ortiz, Boston Bankruptcy Attorney
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Last modified: November 10, 2012