Bankruptcy Attorney Fees
There are few doubts that bankruptcy attorneys are helpful when you’re in the midst of a crisis, but when you’re already financially stretched beyond your breaking point, what do you do about bankruptcy attorney fees? That’s doubly true if you’re carrying debt that includes attorneys’ fees and you still need bankruptcy assistance.
Consider all of that, and you probably have plenty of questions about bankruptcy and attorneys’ fees. Whether you’re trying to pay for an attorney to help you with your filing or you are being hounded by past-due attorneys’ fees, here are answers that we hope will help you find your path forward.
Flat Rates, Hourly Fees, and Plans
Some lawyers may offer payment plans where you only pay a portion of the fees upfront. If so, they’ll likely charge an hourly rate plus a flat fee for representing you in a bankruptcy case. Others may charge a flat fee for simpler bankruptcy filings.
Most consumers prefer the predictability of a flat fee over an hourly rate, while attorneys know that one case may end quickly, while others spiral out of control, so an hourly rate often comes out fairer for the firm. Beware though the “pop-up” shops that promise incredibly low flat rates – many of these may farm your case off to secretaries and support staff, rather than having an attorney handle the case. And given their volume-based pricing, communication, individual support, and attention to detail on your case may be lacking.
What’s a Fair Fee?
Attorney fees can vary depending on how complex your case is and what type of bankruptcy you file, so that makes “fair fees” a bit of a “you know it when you see it” thing for courts and parties alike. Nonetheless, there are enough statistics and guidelines to know when an attorney’s fees are presumably reasonable or completely out of touch with reality.
For one, know that fees (like everything else in life) vary by where you live. Expect higher fees in California or New York, rather than Mexico, Missouri.
Chapter 7 filings can run anywhere from a few hundred dollars (on the suspiciously cheap end) to a few thousand dollars (in pricier locales or in more complex cases). Chapter 13 filings are often higher, as those cases can stretch years with the repayment plans, though many attorneys may still be willing to do a flat fee or a payment schedule.
The fees that you pay must be disclosed to the bankruptcy court, which can review those fees to ensure that they are reasonable. Because judges don’t want every creditor to scream “unreasonable” at the attorney fees in every case, most courts have local guidelines called “no-look” or “presumptively reasonable” fee amounts. As guidelines, they aren’t limits on fees – the court can poke into the fees and find them unreasonable, even if they are in the guidelines (though that is unlikely) and parties and attorneys can go above the guidelines (though that may invite scrutiny from the court and creditors).
Courts have held that there is a presumption of reasonableness for attorney’s fees awarded under §506(b), but that the burden shifts to the creditor to prove that its fee request is unreasonable.
Fee Amounts Don’t Necessarily Correspond to Attorney Qualifications
High cost doesn’t mean high quality.
There are great attorneys who employ enough tools, know-how, and support staff to bring down the cost of delivery to charge less. Many of these experienced attorneys don’t try to maximize their profit on every case – they’d prefer to help more people instead.
On the other hand, there are firms that are all flash and no substance. They’ll charge a higher fee, work out of a high-end office, and have inexperienced attorneys or support staff giving you sub-par service.
Rather than assume that fees correlate to quality, check out the attorney’s qualifications and reviews ahead of time. Schedule a consult – some even offer free consultations. Ask questions about fees (including any potential surprise fees), qualifications, timelines, and how much contact you’ll have with the attorney as the case progresses. It’s not unusual for support staff to handle a lot of the data-gathering and paperwork, but if you see the attorney for the consult and nothing else, that’s a bad sign.
One more thing worth remembering: there are predictable extras as well. Mandatory credit counseling courses and filing fees are a part of every case.
What if You Still Owe Past Attorney Fees? Can Attorney Fees Be Discharged in Bankruptcy?
It may seem a bit unthinkable to hire another attorney when you still owe past attorneys. Many people, especially those coming out of a divorce, may owe attorneys’ fees and be financially stretched beyond their means (especially after handing over half). Can these fees be discharged as part of a bankruptcy filing?
For the most part, yes, past attorneys’ fees can be discharged. Attorneys’ fees are typically given the same treatment as most other unsecured debt – wiped out in a Chapter 7 filing, subject to a payment plan (and a possible partial discharge) under Chapter 13. This is also why most attorneys will require the payment for Chapter 7 filings upfront.
There are some exceptions, however: secured attorney fee debt may not be dischargeable. Some attorneys will require you to agree to a lien in order to take on the case without upfront payment. An example of this is a Family Law Attorney Real Property Lien (FLARPL), a California law allowing attorneys in family cases to put a lien on real estate or housing to secure their fee. Another type of fee that can’t be discharged is attorneys’ fees related to an alimony or child support award if the debtor is covering those fees as part of such an award, as alimony and child support are non-dischargeable debts.
Besides these few exceptions, attorney debt is typically dischargeable, but as always, check with your (current) bankruptcy attorney before counting it as soon-to-be-gone.
Good Help is (Not?) Hard to Afford
Bankruptcy isn’t easy, and it’s usually precipitated by owing so much money that you’re beyond a reasonable chance of repaying it. So it may be nerve-wracking to consider paying for an attorney to help you to escape all that debt. However, given that many bankruptcy attorneys have flat fees, and that courts monitor fees for reasonableness, the uncertainty of hiring your typical attorney shouldn’t give you pause here. Instead, consider the attorney’s qualifications and that you’ll be getting experienced, expert help with your problem, maximizing your chances of a debt-free restart of your financial life. And if you need help finding an attorney, we’d be happy to assist you with our network of attorneys.