Podcast #14: Cost And Fee Structure

Disclaimer

While the information given in this podcast is instructional, it is not intended to be taken as legal advice for your particular legal or financial situation. The recommendations that we give to one person may not be appropriate to your particular situation. The information contained in these podcasts is also not intended to replace the advice that you would receive from an actual consultation with a competent legal professional practicing in the area of consumer bankruptcy law.

Welcome

Welcome to morsebankruptcy.com, the podcast, I’m Todd Morse, the owner of Morse Law. In these podcast we handle various bankruptcy issues from different sources. This particular question comes from our contact forms. These are where visitors to our website ask questions of the firm and the attorneys and essentially usually the first time that somebody has reached out with the first question they are asking to see if bankruptcy is a possible solution to their financial situation. This visitor writes.

Viewer Question

I really need to know what I can do to about filing a chapter 7 bankruptcy I’m about $30,000 in debt and I have very little money and I would have to go on a payment plan.

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Since a chapter 7 bankruptcy is a liquidation bankruptcy, that is far as these debts are concerned they would just simply discharge the debts. We have to kind of assume what he is talking about the payment plan is the anticipation of attorney’s fees, which you know right or wrong, there is always going to be two types of fees charged in every bankruptcy. As really most every bankruptcy is done on what’s called flat fee billing where you pay one fee to the attorney to do it. You then have your attorney’s fees and then you will have your court’s filling fees. Now if it is a chapter 7, at present the court’s filling fees is $306. They gave themselves a raise about this time last year of about $7 so that’s where it is and there are couple ways to handle that. If you truly have no income or very little income, it is possible to apply for a waiver of the filling fee though you do have to have a pretty remarkable situation for the bankruptcy court to grant that.

More commonly what people have chosen to do is to put the filling fee in installments where you would simply structure the $306 filing fee most commonly over 4 monthly payments of $76.50 each, one a month for four months totaling up to $306 and you just pay those by sending a money order to the bankruptcy court once a month for the four months after you file and that’s usually a fairly workable solution.

Now in the attorney’s fees the other fees associated with filing a bankruptcy, those fees are set based on the time it takes to do the case. So one of the things you are doing in a consultation, aside from figuring out what chapter you are qualify for and making sure that all of your assets are safe, is the attorney is calculating in their mind how many hours it’s going to take for them to draft this bankruptcy, get it filed, go to the hearing, and follow it through to discharge. So that’s going to vary pretty wildly.

In our firm we calculated ours out and our cheapest simplest bankruptcy we do for $475. There are just some folks with situation that are so simple quite frankly it just doesn’t take us a great deal of time to do the drafting. You know there is no collections, there is no assets, there is you know several factors that go into it but these are the kind of cases that really just don’t take a lot of time. Now as you add assets to the scenario as you add increased collections like law suits, garnishments, things of that nature maybe there’s been some repossessions or some foreclosures either in the recent past or are underway right now that certainly requires more schedules to be filled out more analysis to be done and that’s going to increase the fees as well

But in any event, any responsible law firm is going to try to understand what people are going through. That you are not filing bankruptcy at a time when you’re flush with money and they’ll do what they can to keep the fees as low as possible.

How you pay those fees is going to vary greatly from one bankruptcy firm to another. Now at our firm, Morse Law, we have a pretty liberal policy with fees. We do abide by the courts rules that fees need to be paid before the bankruptcy is filed. Now some will say that’s not a rule but the reality is the majority of the judges do follow that rule, you never know what judge you gonna get until your case has been filed. So we tend to follow the course, majority rule, which is the bankruptcy fees in chapter 7 cases, do have to be paid before the bankruptcy can be filed. But how you go about paying those prior to filing it’s just really just up to you.

Some firms will have it setup where you can break out your fees into a certain number of payments and it has to be a certain amount each month, maybe over 2 or 3 months and then you can file your case. Now we don’t do that. I mean that’s rather presumption, in my opinion, you are presuming that the person has x number of dollars every month. Then you are presuming that they have those dollars to give to the bankruptcy firm for the purpose of filing their bankruptcy when that may not be very well be the case.

So our take on it is to then analyze the case. Let the person no upfront on the first day what the total amount of fees will be to do the bankruptcy and then just leave it up to them. They can make payments of a little a month they want to or none some months and then simply pay it as they can and when they can. Then once the fees have been paid off that’s when we draft the case and have it ready to file. There is no particular method of payments. Some people tend to do cash, some checks, some money orders. Some people drop it off and some people mail it in. Recently people have become more fond of doing electronic payments and we do have the forms that we can give you to fill out if you prefer to set something like that up.

Some the client sets themselves up on a rather rich and dogmatic payment structures. If that something they want to do that to do that’s certainly fine as well. I tend to shy away from those things because life just doesn’t work like that. I prefer people to make payment as they can, when they can and once everything is been paid off that’s when we draft it up and go ahead and get ready to file. But it’s really up to the client at the end of the day.

So in this particular person’s situation they don’t mention that there is any immediate collection activities going on. They don’t say anything about having been served with a summons and complaint. They don’t mention anything about garnishment of wages or bank account being attempted so my advice to them would be just to come on in and do the consultation those are free. Find out if they can file and if so what chapter they would qualify for filing and then definitely find out exactly how much that filing would cost.

Once they know that if that something they wanted to do, then without having any collection activities that directly threaten them right now they’ll be in a position where they know the need to get filed as soon as they are able to get filed. But they can take their time if they need to come up with the fees and may be get some of their paper work in order while they are doing at so once their fees are paid they will have the fees and the documentation that we need to draft the bankruptcy and get things under way as soon as everything is in place. So if nothing else what they should probably do is come in and manage a free consultation just to find out where they stand. But that’s probably one of the biggest issues facing anyone looking to file a bankruptcy is what it is going to cost, how I’m going to be able to pay for it, what is the firm allow for, and what do they not allow for. Because of it brings up all of those issues, it’s a very good question.

Prerequisites

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