How Do Bankruptcy Attorneys Get Paid

Bankruptcy attorneys get paid depending on the bankruptcy type.

If you’re thinking of filing for bankruptcy and are concerned about attorney fees, consider these factors affecting payment:

  • Assistance from family and friends to cover the lawyer’s retainer.
  • Assessing whether you have dischargeable bills through bankruptcy.
  • The specific chapter of bankruptcy you plan to file.
How Do Bankruptcy Attorneys Get Paid
How Do Bankruptcy Attorneys Get Paid. Source (Forbes)

How Do I Get the Money to Pay a Bankruptcy Lawyer’s Retainer?

You can’t use your credit card shortly before bankruptcy to pay your lawyer, but a friend or family member can.

Many people turn to loved ones for help when they realize bankruptcy is a viable option.

When this isn’t possible, most filers stop paying bills that will be discharged in bankruptcy, redirecting the funds toward bankruptcy fees.

This practice is generally accepted by bankruptcy courts, but ensure your eligibility to file before halting bill payments.

You should also continue paying any nondischargeable debts, seeking guidance from your bankruptcy lawyer if needed.

When Do I Need to Pay a Chapter 7 or Chapter 13 Bankruptcy Lawyer?

The approach varies by the bankruptcy type. If you’ve already determined your filing chapter, proceed to the relevant section.

How Chapter 7 Bankruptcy Lawyers Get Paid

Bankruptcy lawyers typically charge reasonable fees for Chapter 7 cases, often using a flat fee structure. However, they require full payment before filing.

This requirement is due to the automatic stay that prevents creditors from collecting after filing, which also applies to the attorney’s unpaid fees.

Any remaining legal fees are discharged with other qualifying debts after you receive the bankruptcy discharge.

What About Chapter 7 Bankruptcy Lawyers Who Advertise Payment Plans?

Lawyers often allow fee payment in installments, but the case won’t be filed until the full amount is paid.

While some delay payment until they have the total sum, it’s wise to make an initial payment to officially retain the attorney.

This way, creditors can’t harass you, and you can direct them to your attorney.

How Chapter 13 Bankruptcy Lawyers Get Paid

Chapter 13 fees differ from Chapter 7. You don’t have to pay the total upfront, but rather a portion can be covered through the Chapter 13 repayment plan.

The amount varies by the lawyer’s policy, with some accepting as little as $100 to file your case plus the court fee, with the assumption that you’ll stay in the plan.

However, if you can’t make the monthly Chapter 13 payment and the court dismisses your case, the lawyer won’t get the full payment.

Due to this risk, many attorneys want the same amount they’d receive for a Chapter 7 case upfront and allow the remaining portion, usually about $1,500, to be paid through the Chapter 13 plan.

In riskier cases, the attorney might request more.