Is it possible to go through an affordable bankruptcy?

Posted by John A. HixsonJan 25, 20180 Comments

When you're faced with the prospect of bankruptcy, the last thing you want to do is face addition burdensome costs when it comes to legal fees. The good news is that with some negotiating and pre-planning on your part, a bankruptcy can be more affordable than you might first suspect.

Which type of bankruptcy you file will have an impact on when you must pay attorney fees

When filing for a Chapter 7 bankruptcy, your attorney will most likely require that you pay your fees in full prior to filing a case. This is because to qualify for a Chapter 7 bankruptcy, you must be able to prove that you have little to no income and very few assets. In this type of situation, an attorney is wise to protect him or herself instead of winding up as another creditor at the end of the case.

However, in a Chapter 13 bankruptcy, an attorney has more leeway regarding fees because, for a Chapter 13 bankruptcy plan to be approved, it must be shown that there is a stream of income that can be used to satisfy debts. It is not unusual for an attorney to agree to waive their entire fee upfront or to ask for a balloon payment at the end of the process. Many times, the attorney's fees can be included in the Chapter 13 repayment plan and the legal fees can be paid in installments as part of the bankruptcy. The risk is removed because a trustee handles the monthly payments, creating a sort of insurance policy for the attorney.

For a person going through a Chapter 13 bankruptcy, this means they don't even really need to think about attorney's fees at all since they're rolled into the repayment plan by default.

Discuss fees with your attorney up front

When you are interviewing attorneys to represent you in a bankruptcy case, it's wise to discuss fee structures and payment plans as part of your overall initial consultation. Every attorney is different, and some may require a small fee up front, while others may be happy to roll the entire amount into a repayment plan.

The way that you pay your fees may also be impacted by not only the attorney's policies but also what a judge or trustee will allow, the feasibility of your case and what is considered normal at a local level.

The Hixson Law Firm serves clients in Mansfield, Arlington, Grand Prairie and other nearby Texas communities.