How Much Does Bankruptcy Cost: Part II

Read Part I

My legal fees are based on my experience of how much various factors contribute to the time and effort I spend on a case.  At the outset, we have to distinguish chapter 7 cases from chapter 13 cases.  A chapter 13 case is one in which you propose a payment plan to the court over 3 to 5 years (depending on qualification).  You do not have to pay 100% of your debt in chapter 13, only what you can afford to pay over the 3 to 5 year duration.  What you can afford to pay is based on a simple formula (which is interpreted by scores of cases across the country).  Under a chapter 13 plan, you can actually pay your attorney fees through the plan.  But those attorney fees have to be approved by the court.  

Chapter 13

The MN bankruptcy court has set attorney fees that will be automatically approved to be paid in a chapter 13 plan.  As such, these amounts set the standard for chapter 13 attorneys in MN.  For a 3 year plan, the court will approve $2,500 for payment of attorney fees.  For a 5 year plan, the court will approve $3,000 for payment of attorney fees.  These amounts are flat fees that cover all of your legal services for the duration of your plan.  Many MN bankruptcy attorneys will require their clients pay a portion of the fee up front and pay the balance through their chapter 13 plan. 

I do not require my clients filing for chapter 13 protection to pay any of my attorney fees up front.  They can pay the entire amount through their chapter 13 plan.

Chapter 7

For a chapter 7 bankruptcy, there is no payment plan to pay attorneys fees though.  Additionally, the law requires that all chapter 7 attorney fees be paid in advance of the case filing, or the bankruptcy attorney will have discharged the debt with the client's other debts.  If my client cannot pay my fee in advance of the case filing either in a lump sum or in installments, I do have a payment plan available, but it requires that the client have a "guarantor" to sign on the debt, to avoid it being discharged once the case is filed. 

When I determine what I will charge for a case, I think in terms of time: How much time will this case require to ensure that my client's outcome is the one they have bargained for? At a minimum, a chapter 7 case takes me 8 hours.

Task Time (hrs)
Initial consultation 1
Processing client documents, compiling petition and schedules: 4
Review credit report, judgment search, and real estate search .5
Second consultation to review and explain the court documents to client 1
Travel to and represent client at 341 hearing 1
Correspondence with client re: reaffirmation, creditors, and financial management course .5
Total 8

My attorney fees for a chapter 7 start at $1,200.  This amount allows me to pay my overhead and make a living for the amount of cases I typically file in an average month.  There are other factors that require additional time and effort, as the outcome of a case can change based on the specifics of these particular factors.  Below is the amount I add to my $1,200 base fee for clients whose cases involve the following factors.

Factor Fee
Owns home with mortgage(s) $300
Owns multiple properties $600
Owns a small business $500
Owns a business with assets and employees $1,500
Pending or recent divorce $500
Shares bank account with non-spouse $250-$500
Multiple sources of income in past 6 months $250
Over median income $600
Payments to relative w/i 12 months $150-300
Transfer assets w/i 12 months $500-$1000
Potential lawsuit asset (personal injury, workers' comp, social security, etc) $200-$600
Rush filing b/c of garnishment $400
Non-exempt assets $200

These amounts are guidelines that I use, not hard and fast rules.  The presence of each of these factors requires more time and effort on my part to ensure a proper outcome for your case: time reviewing documents, potentially conducting legal research, and corresponding with the creditor(s) and/ or trustee to ensure proper resolution of the issue.  

 Here is where it gets complicated

For example, under the law, any transfer of an asset to a friend or relative within the 6 years before a bankruptcy case is filed can be scrutinized by the bankruptcy trustee.  If the trustee determines that insufficient value was received by the person now filing for bankruptcy protection, the trustee has a legal claim against the party who received the asset.  So, if you were divorced within the 6 years prior to filing for bankruptcy, I have to review your divorce decree to determine if the trustee can potentially claim that the property transfer pursuant to the divorce decree was too one-sided and go after your ex-spouse (or you) for the difference between what the assets were worth at the time they were transferred and what the person who now owns them gave in return for them. 

 Free Consultations, always.

What you should keep in mind is that consultations are always free.  It will not cost you a dime to find out what charge I will quote you for your case.  I offer free consultations, because I know that after you meet with me and I explain your options, that you will hire me if you choose to move forward with bankruptcy because you will know that you are in good hands.  If you were going to build a deck on your house, you essentially have three options: 1) do it yourself; 2) hire the bargain-basement guy; or 3) hire a professional.  If you choose to hire a professional, you're paying for piece of mind that when your family steps onto that deck that it is well-built and will hold for years to come.   

It's the same when hiring an attorney for bankruptcy, do you want to pay $900 for someone who won't return your calls and is hoping your case turns out fine, or do you want to spend a few hundred more for a professional who will take the time to ensure your case is handled properly and is always available to answer your questions?

 If you would like to schedule a free consultation, call 763-568-7343.

 

 

 

 

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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