Minimal Or Zero Dividend Chapter 13 Plans: The Newest Battleground

04 May Minimal Or Zero Dividend Chapter 13 Plans: The Newest Battleground

Fees and costs of bankruptcy have skyrocketed, forcing debtors to seek Chapter 13 just to afford access to the bankruptcy courthouse doors. The 2005 reforms have so increased the complexities and burdens of filing for bankruptcy protections that professional fees have increased about 50% and costs have doubled.

What used to be barely affordable for many filers is not so anymore. Debtors are forced to turn to a Chapter 13 plan simply to pay their attorney fees.

Some trustees and judges object to this, saying it’s a “bad faith” abuse of Chapter 13. That’s an instinctive negative reaction, but compelling logic requires otherwise. Fees and costs are too high to expect modest monthly savings to pay for a Chapter 7 filing in any meaningful time for many debtors. They need the automatic stay protections quickly, to stop the wage garnishments, law suits, and collector harassment.

Only Chapter 13 can meet this need. Requiring an unaffordable dividend on top of the burdensome fees and costs is nothing less than an illegal tax, an unfounded additional filing fee.

It’s been asked why an attorney didn’t perform the necessary Chapter 7 services and then send a bill after the filing. That instinctive negative reaction is so strong that it temporarily overcomes the awareness of the obvious response: The fees are discharged upon filing, and the suggested bill is unlawful.

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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