One of the most frequent questions I get is: "How am I going to pay the attorney's fees and costs for a bankruptcy?"
Yes, we know you're seemingly strapped, but you actually have more resources than you realize.
Here are some:
1) Stop paying on the debt you are going to discharge anyway. In bankruptcy, almost all debts are dischargeable (wiped out). (There are a few, such as governmental fines, recent taxes, etc., but your bankruptcy attorney will identify them and discuss them with you.) The majority, such as credit cards, unsecured lines of credit, judgments, will be gone. Stop paying immediately and save up that money to finance your case. These are professional lenders, they understand.
And, by the way, once you hire an lawyer, you can stop the collector calls by simply telling them you have hired a bankruptcy attorney to prepare a case. Give them the name of your attorney, because they will call to confirm, and the calls will stop.
Professional lenders know they will be violating a court order by calling once you have filed, and since they don't know when you will file, as a matter of company policy, they usually stop the calls altogether. Whew.
2) Get a "loan" from your secured lenders. If you have a mortgage on a house you want to keep, you may actually be doing the mortgage lender a favor by skipping a couple payments to pay for your case. If your goal is to save your home, you will probably be filing a Chapter 13 bankruptcy to catch up on your back payments -- "cure the default" -- and make your regular payments going forward.
Believe me, the bank does NOT really want to take your home. They are not in the real estate business. They are in the lending business. They want you to pay the mortgage and pay the arrears -- that's where they make money. If you skip a couple payments to get the money to set up a payment plan to pay them in Chapter 13, as well as freeing up more money by wiping out your other "junk" debt, such as credit cards, as a business matter, they won't mind. You're going to pay back the missed payments in the plan anyway.
3) Get help from friends and family. Now is the time to reach out. Everybody has somebody who will help. Think. Oftentimes, it's somebody from your community, such as church or social group, with whom you have an affinity that will be there for you. You may be surprised.
And here's the benefit to them: Once you're debt-free, you'll have even more resources to be able to pay them back. And no. Please, don't tell me you have no friends and/or no family. If that's the case, you may need a Dale Carnegie course. (Remember him? The author of "How to Win Friends and Influence People." Google it.)
4) Take a "hardship loan" from your retirement plan. If you have a retirement plan at work, call the administrator and see if you can apply for a hardship loan from the plan. Most plans have this feature. Make sure it's a loan, do NOT take a withdrawal. If you take money out of retirement plan (as opposed to a loan you pay back), you will have to pay taxes on it as well as 10% penalty. I see too many people turn a debt problem into a tax problem (which is way more expensive and onerous) when they take out withdrawals from the retirement plan to pay debts. It's a no-no.
5) Use your tax refund. Like accountants, January through April can busy months for bankruptcy lawyers. Many people use their tax refund to pay the costs of a bankruptcy filing. It may work for you, too.
6) Go hi-tech: Crowd-fund your case. The Wall Street Journal today ran an article on the innovative use of "crowd-funding" to raise money for a variety of personal projects and causes, including:
- A 26-year-old woman trying to raise $3,000 on GoFundMe.com to go to circus school to be an acrobat.
- A group of young women using Tilt.com to raise money from participants for a bachelorette party.
- A 55-year-old woman who got laid off from her job, needed a break and got her friends to chip in $5,000 for a trip to Italy.
A quick perusal of the sites showed a variety of causes seeking funds for help for medical bills or funeral costs.
Who knows? It could be the wave of the future.
There are other ways to get the money to pay for a bankruptcy filing, depending on your particular situation. Sit down with an experienced bankruptcy lawyer and discuss it. We're creative. Give our office a call.