In almost all client meets the question comes up "Why Do I Have to Pay the Bankruptcy Attorney Before He Files My Case?". When you decide that you need to file for Chapter 7 bankruptcy to protect yourself from creditors, in most cases you want to file right away. The need to file right away is usually a result of creditor harassment, a pending lawsuit, wage garnishment or a pending foreclosure. You want relief from creditor action and to avoid any future problems with garnishments or bank levies, but having to pay your attorney is stopping you from getting relief.
In most situations you may not have the full fees that the bk attorney have indicated that your case will cost. Given your financial situation it is understandable to the attorney that a client needs to set up a payment plan to pay their bankruptcy case fees. Most attorneys will set up a reasonable payment plan to pay off your fees, but will they file your case prior to you paying off your fees?
Will My Attorney File My Case If I Have Not Finished Paying My Fees?
A bankruptcy attorney will generally not file your bankruptcy case until the full fees needed to file your case are paid. Does this mean that your bk lawyer does not want to help you and is being indifferent to your financial situation? It simply means that the attorney is choosing to act ethically in handling your case. A bankruptcy lawyer that you hire to file your bankruptcy case has been retained to perform certain work prior to the filing of your case. Any amount that is owed to the bankruptcy attorney at the time of filing of your case is potentially subject to discharge. Once the bankruptcy case is filed the automatic stay protects you from any collection efforts including those of your bankruptcy lawyer. Once the bankruptcy case is filed your bankruptcy attorney cannot call or try to contact you about the outstanding fees. As a result the lawyer could potentially not be paid any outstanding fees owed to him at the time of filing.
Can't I Set Up Something Where I Agree To Pay Him After Filing?
Although you can voluntarily agree to pay any creditor after filing there is no guarantee to the attorney that any of the fees would be paid. The bk lawyer has very little recourse to be paid any of the unpaid fees if you decided not to voluntarily pay the fees. They would not be able to send you a notice about the unpaid fees or call you to try to collect on the fees. These fees would more than likely have been discharged as part of your bankruptcy case. If the attorney contacted you or requested a payment for the unpaid fees after your bankruptcy case is filed he could potentially be subject to sanctions from the court. An attorney cannot collect Chapter 7 fees post-petition.
What About the Firms that Advertise $100 to Start?
These advertisements generally refer to retaining the attorney but not to actually filing the case. They indicate that with a $100 retainer you can start referring creditors to their office and retain the attorney. They do not refer to having your bankruptcy case filed in court.
Are There Any Exceptions?
In the 9th circuit, your bankruptcy attorney may be able to break up your fees into pre petition and post -petition services and only charge you for pre-petition work prior to filing your bankruptcy case. The post petition services would be a separate payment that would not be subject to discharge and the attorney would be able to collect after the discharge of your bankruptcy case. This is based on, In re Sanchez, 241 F.3d 1148 (2001), where Court of Appeals held that a chapter 7 debtor's attorney did not violate the automatic stay by collecting reasonable fees for post-petition services. The tricky issue is ensuring that the attorney is not charging you for work done pre petition after the filing of your bankruptcy case.