How Much does Bankruptcy Cost: Part I

The misconception is that when you hire a lawyer, you are paying for a legal document that the lawyer drafts. The thought is that the bankruptcy attorney simply has to collect information from you and he or she compiles that information into a court document and files your case........what you are paying for is legal analysis.

One of the first questions people have for me when I meet with them to discuss bankruptcy is: how much does filing for bankruptcy cost?  It is an important question, but it is one that is difficult to answer because it depends on the person's particular situation.  Attorney fees in bankruptcy are flat fee based.  This means that when I give a person a quote on a fee, that is the entire amount that I will earn working on your case, so it is important that I set my fee based on how much time and effort your case will take.  Because once we file your case, I am bound by the law to represent you.  If I have undercharged, then I will basically be working for free to resolve your case issues.  If I set my fee too high, then I may price myself out of the market and have potential clients opt for more cost-effective representation.   

We're on the same team

As a bankruptcy lawyer, I also must deal with the reality that my clients are not at a point in their lives where they can afford to spend many thousands of dollars on legal fees.  My goal in setting my fee for each case is to arrive at a fee that works for my client, but also allows me to earn a living without spending time on a case essentially working for free.  If you have shopped around for a bankruptcy attorney you may have come across advertisements that state "Bankruptcy filed for $900 plus filing fee," or something similar.  Having worked in this field for a number of years, I am suspicious of the lawyers charging bargain-basement rates for two reasons.  The first is that not all cases are the same.  

Let me start by explaining a popular misconception.  The misconception is that when you hire a lawyer, you are paying for a legal document that the lawyer drafts. The thought is that the bankruptcy attorney simply has to collect information from you and he or she compiles that information into a court document and files your case.  In reality, when you hire an attorney, in any area of law, what you are paying for is legal analysis.  The practice of law is the practice of understanding an area of law and helping people navigate that body of law to get a desired result.  Think of an area of law as a filter.  The laws are put in place to filter people (and their particular set of circumstances) into categories.  Those categories each get a different result based on what the legislative body that enacted those laws is trying to accomplish.  

Different Types of Bankruptcy

For bankruptcy, Congress wanted to separate people who cannot pay anything on their debts from people who can afford to pay something - so we have chapter 7 and chapter 13 bankruptcies.  In addition, Congress wanted to allow people filing for chapter 7 to keep enough of their things to continue to support their families and enjoy a certain standard of living, but wanted to draw a line so that if the person owned many things, that some would be turned over to their creditors - so we have chapter 7 bankruptcies in which the filer keeps all of their things (no-asset cases) and we have chapter 7 bankruptcies in which the filer has to turnover some of their things or pay the value of those things to the trustee in their case.  What you are paying a lawyer for is their knowledge and expertise in being able to look at your situation and tell you how it will come out of the filter.  If you have hired a good lawyer, he or she should also be able to tell you how to make it come out different if you do not see the result you would like.  The legal documents are simply to effectuate that result. 

You get what you pay for... sometimes less.

So when I see an attorney advertising that he or she charges all clients the same amount, I am skeptical.  It will take a lot more of my time as a lawyer to properly review and analyze a case for someone who runs their own business, owns 4 properties and is in the middle of a divorce, than it will for a person who rents and whose sole source of income is social security retirement benefits.  I doubt very strongly that the attorneys making these advertisements are going to charge the business-owner with real estate holdings the same as the fixed-income retiree.  Those attorneys are then in a position of charging more (read: bait and switch) or spending 50 hours on a case in which they have charged for 5.  

The second reason I am skeptical of the attorneys making these bargain-basement bankruptcy advertisements, is that if the attorney advertising bankruptcy for $900 is truly charging all clients the same fee, then he or she may very well simply be compiling information into the court document, filing it, and crossing fingers that his/ her clients come out of the bankruptcy unscathed (read: providing shoddy service).  Unfortunately, I know that this is how some attorneys handle their practice because I have met with clients who first went to them and now know why it was a bad idea.  I get calls and emails from people who hired an attorney to do their case, are currently in the middle of their bankruptcy, are completely dissatisfied with the service they are getting and how their case is being handled and want to hire me as their replacement attorney.  However, the rules of professional responsibility prohibit me from providing legal advice to someone who has already hired an attorney to provide such advice. 

So how much does bankruptcy cost (for a good lawyer)? 

For the answer to that question, read How Much Does Bankruptcy Cost, Part II.

This content is not meant to constitute advice of any kind, including without limitation, legal advice of any kind. If you require advice in relation to any legal matter you should consult an appropriately qualified lawyer.

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