Most people contemplating bankruptcy obviously are in a financial bind. As a result, it is natural that one of the questions they ask of a bankruptcy attorney is how much it will cost to file. While this desire to keep the cost as low as possible is understandable, those considering bankruptcy should be aware that the best long-term option that saves the most money is not necessarily what appears to be the cheapest path.
First of all, we have seen cases where clients have signed up with inexperienced lawyers who have charged very little for their fee but have failed to protect the assets of their clients. One such client came to us after the damage was done and he had lost $11,000 that could have been protected with proper counsel and planning. Unfortunately, there was nothing we could do to extricate him from this mistake.
Second, the actual cost of filing for bankruptcy protection necessarily varies depending on other factors as well, such as whether one qualifies for a liquidation or must instead enter into a payment plan. But there may be reasons why someone who would otherwise qualify for a discharge in a few months under Chapter 7 might instead prefer a wage-earner plan under Chapter 13. Typically, a Chapter 13 might be used to catch up on mortgage payments and save the family home. Cases under this chapter most often fall under the Court’s “no-look” rule and thus the cost is the same no matter what attorney is employed. The cost for a Chapter 7 may vary depending on whether a debtor needs to file with little or no money down due to a garnishment or can come up with the entire legal fee up front. Either way, it is best to discuss these choices in depth with competent counsel.
Third, there are the Bankruptcy Court’s filing fees. These charges support the Court’s operation and are standard across the country. At the time of this publication, the fee for filing personal bankruptcy under Chapter 7 is $335 and $310 for a Chapter 13. Businesses and high-asset individuals filing under Chapter 11 are obliged to pony up $1,717 to file their cases. There are other chapters that are little used. For example, Chapter 12 cases for family farmers and fishermen amounted to little more than 0.06% of all cases filed during the last 12.
Undoubtedly, the fees charged by a lawyer and the Bankruptcy Court appear to be substantial to the average filer. However, the amount of money saved in the long run should make the expenditure well worth the cost. Moreover, the downside of choosing overly busy or inexperienced attorneys can have expensive, and even disastrous, consequences. With attorney fees being the majority of the cost of a case, it is understandable that a struggling debtor might be tempted to seek out the cheapest possible lawyer. A billboard or park bench may advertise a local law firm provides bankruptcy services “for a mere $555” or other similarly low quotes. Despite these “teaser rates,” one should be wary of the quality of the services that will be provided.
Bankruptcy is often considered one of the most stressful and daunting times in an individual’s life. Do you really want to go through this stressful time with a discount lawyer who doesn’t really care about your case, and may simply do the bare minimum? This sort of service may lead to not getting the highest quality service and can lead to paying more in the long run to creditors and the trustee than you would have paid to competent and slightly more expensive legal representation. Competence, loyalty, and knowledge should really be the deciding factors when you are looking for legal representation in bankruptcy, not cheapness.