“If I had the money to pay you, I wouldn’t be in this mess!” That’s something that all bankruptcy attorneys hear, and while usually not true (I don’t charge nearly enough for that amount to be able to fix my clients’ finances), it’s a sensible feeling. Money is the problem, and to fix that problem you need, well, money. I believe that the fees that I charge are reasonable. But what happens when a potential bankruptcy filer can’t pay those fees?
In Chapter 13 bankruptcy (paying debts through a 3 to 5 year repayment plan), a significant portion of the attorney fees can be made payable in the repayment plan. This reduces the amount required prior to the date the case is filed.
The problem of figuring out how to pay for attorney fees is more common in Chapter 7 cases. Ethical rules require that I collect the full fee prior to filing a Chapter 7 case. Here are some options that my clients have used when they were unable to pay the full Chapter 7 fee upfront:
- Wait until tax return season (or in COVID times, use a stimulus check).
- Borrow funds from a family member.
- Pay funds over time – I often will start preparing a case while my client is saving up funds. In some instances, the client will stop paying on debts that will be discharged in the bankruptcy.
- Withdraw funds from a retirement account – though I generally don’t recommend this due to tax implications.
For some, none of these options are available. Even if you think that you cannot afford bankruptcy, it is still worthwhile to speak to an attorney. There may be a creative solution for your situation, or potential non-bankruptcy options.