Here are the facts:
- All bankruptcy attorneys filing in a specific court charge within a few hundred dollars of each other. This goes for the bankruptcy courts in DC, suburban Maryland. The reason: Bankruptcy fees are disclosed in all cases and they are easily available for viewing on-line by attorneys e-filing in that court. Any attorney wanting to see what the other guy or gal is charging? Go to the court’s website, a few clicks and voila, you know! Everybody charges within that range.
- Lawyers are not stupid. (OK, no jokes!) They have to run a business and earn a profit to make a living. The guys or gals who charge low-ball prices and tout inexpensive bankruptcy make up for the lower margins by running more cases through the office in less time. It’s what’s known as a “mill.” Expect less attention and time answering your questions and concerns. You get what you pay for. We get way too many calls from disappointed customers who got no service from such firms.
- You cannot be overcharged. The US Trustee’s Office (UST), which is the US Justice Department’s watch-dog guarding the bankruptcy system from abuse, closely monitors attorney fees. (This is especially true for the US Bankruptcy Court, District of Maryland, Greenbelt Division, the court serving residents of suburban Maryland, outside Washington, DC.) The UST attorneys, and the judges, know the “going rates” for a bankruptcy. Too high, and the UST will file a motion asking the judge to order the attorney to “disgorge” — return excess attorney fees back to the client.
- For Chapter 13 bankruptcy cases in suburban Maryland, the court has a set preferred fee schedule. In bankruptcy, attorney’s fees must be approved by the court. To save time and reduce effort by everyone, the local bankruptcy courts (except DC) have set pre-approved fees for cases, based on the range of services to be delivered. In the US Bankruptcy Court, District of Maryland, Greenbelt Division, the court allows $2,000 for services that are limited to plan confirmation only (with additional services at an hourly rate), $3,500 for services including all matters in the case (with unexpected, extraordinary services, and services occurring 90 days after confirmation, at an hourly rate) and $4,500 for services including all matters (with no additional fees ever, except for unexpected, extraordinary services). Since most cases will involve additional work beyond plan confirmation, the $3,500 flat fee is the most cost-effective for clients and the one usually charged by attorneys.
- The cost of a bankruptcy is tiny compared to the benefits. Run the numbers. If it costs $1,500 (the average for a typical Chapter 7) to get rid of $30,000 in credit cards, what is the net benefit? Answer: $28,500! Know any investments where you can invest $1,500 and get back a return of $28,500 in only four months? If you do, then you shouldn’t be here reading this. You should be out running a hedge fund. A few dollars more or less is insignificant compared to a benefit ten times your cost — assuming you have chosen an attorney for the experience and qualifications to get you results.
- “I can’t afford it.” When the garnishments begin and a creditor seizes your bank account or a significant part of your paycheck, you cannot NOT afford the protection and relief from debt that bankruptcy affords. So how do you finance the fees and cost? A few options:
- Save it up. Stop paying on debts you will discharge anyway, such as unsecured debt or loans on property you are planning on giving back to the lender. Continuing to pay is a waste of money and also a possible “preference” in bankruptcy in which the creditor can be forced to pay the money back to the case administrator to be divved up among all creditors fairly. Also, don’t be accused of “bad faith” if you pay one creditor and don’t pay another before the filing. If you don’t have the means, just stop paying them all.
- The “friends and family” financing plan. Bankruptcy removes the legal obligation, but it’s not against the law to voluntarily pay if you want. Many clients get loans or gifts from persons they know to pay for the service. Post-discharge they have more excess income to make voluntary re-pay.
- Borrow from, or partially liquidate, an “exempt” asset to generate funds. In bankruptcy, some assets are protected and remain property of the debtor. Retirement plans, for example, are generally exempt. If necessary, you may be able to borrow from it or take a hardship withdrawal, depending on the plan’s rules. Plan with your attorney.
Shopping for a low-price bankruptcy is not a smart way to pick a bankruptcy law professional. Cost is only one factor, and a factor of very low relative importance, at that. Instead look for an attorney you trust, with whom you have a good working relationship, who answers your questions, and who has the legal experience and qualifications to get the results you need.
If you need time to raise the fee, see, our new FINANCED BANKRUPTCY℠ program for basic consumer cases. If you qualify, you will have attorney representation — and peace of mind — starting with a minimal down payment.