How Do Attorney Fees Work in Chapter 7?

      

File-for-Bankruptcy-in-FloridaIf you are thinking about filing for Bankruptcy, especially Chapter 7 bankruptcy, how do you pay your lawyer?  Obviously you are experiencing extreme financial difficulties and you need bankruptcy relief.  How can you afford to pay your lawyer?

I believe the hardest part of Chapter 7 bankruptcy is coming up with the money to pay your lawyer.  The main reason it’s so hard is because your lawyer needs all the fees upfront before he files your case.

Recently, a lawyer in Louisiana got into hot water with the bankruptcy court.  He was advertising “no money down” Chapter 7 bankruptcies.  He wouldn’t collect any fees upfront, and would have prospective clients sign a Chapter 7 Bankruptcy a “credit/debit authorization form” under which he collected his fee by debiting the client’s bank account as the case progressed.

You may think this is OK, but bankruptcy law is very unique and specific.  When the bankruptcy petition is filed with the court, the automatic stay goes into effect.  The automatic stay basically stops all collection efforts – and can create a problem if a bankruptcy client owes his attorney any fees.

In the Louisiana case, the court ruled the bankruptcy lawyer violated the automatic stay. The court rejected the lawyer’s argument that the collection of fees during the bankruptcy was not a violation of the automatic stay.  The court found that the automatic stay was broad enough to cover a claim for the attorneys’ fees.  The court also ruled the pre-petition Credit/Debit Authorization was void because it violated bankruptcy law. The court deferred judgment for damages.

As you can see from this example, your Chapter 7 bankruptcy lawyer requires all the fees upfront.  If any fees are paid to the lawyer after the filing of the petition, it violates the automatic stay.  Also, the lawyer can be considered a creditor (because you owe him money) and this would be a conflict of interest.

This is why your Chapter 7 bankruptcy lawyer requires all the fees upfront before the case can be filed.

If you are experiencing financial hardship, such as burdensome credit card debt or are facing a foreclosure – don’t wait!  It can really cost you.  It does not hurt to get a consultation from a qualified bankruptcy lawyer.  It can really save you in the long run.

If you find yourself too deep in debt, and cannot possibly pay your bills, I can help.  If you are facing a foreclosure, utility shut off, or lawsuit, I can help.  Please call my office at (814) 240-1013 or email me at richarda@johnstownbankruptcy.com with your questions.  The first office consultation is free and payment plans are accepted.

           

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