How Much Does Bankruptcy Cost?

29 Mar 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 pay your attorney, is a primary concern to virtually everyone who considers bankruptcy.

Attorney fees for filing bankruptcy depend on a number of factors–prevailing cost of living 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 lawyers charge attorney fees on a flat fee basis, with the fee designed to cover the work that the attorney anticipates will be necessary in that case. 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 bankruptcy 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.

Bankruptcy is an enormously complicated area of the law, and your bankruptcy lawyer will look at all your assets (down to your clothing) and all your debts (including the $50 you borrowed from your brother-in-law). She’ll look at your tax returns for at least two years, and your bank statements for at least six months. She’ll review your paystubs for at least seven months, and ask you questions about all of that. She’ll review your budget, lawsuits, mortgages, credit report, tax appraisals, real estate appraisals, insurance policies, and a dozen other things. You really don’t want your lawyer to shortcut any of that–the reason for doing it is to protect you. You want your lawyer to be compensated for all that time, so that she has the time to be careful and thoughtful, to prevent nasty surprises and get the best outcome for you.

In other words, hiring a lawyer is a good 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?
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 can delay 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 attorney 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 in order to file a bankruptcy.

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