Most debtors who file for bankruptcy don't have a lot of money to pay for an attorney. For this reason, many people wonder how bankruptcy lawyers get paid. In general, how a bankruptcy attorney gets paid depends on whether you are filing for Chapter 7 or Chapter 13 bankruptcy. Read on to learn more about how bankruptcy lawyers get paid.
For more information on whether you should hire a bankruptcy lawyer, see our topic area on Getting Help With Your Bankruptcy.
How your bankruptcy lawyer will get paid depends primarily on the type of bankruptcy you file. If you want to file for Chapter 7 bankruptcy, you will usually need to pay all of your attorney fees before your case is filed.
If you file for Chapter 13 bankruptcy, you might need to come up with a portion of your attorney fees upfront. But you can typically pay the remainder of your fees through your repayment plan after your case is filed. (To learn more about how a Chapter 13 plan works, see our topic area on The Chapter 13 Repayment Plan.)
When you file for bankruptcy relief, an automatic stay goes into effect that prohibits most creditors from collecting their debts from you. If you have unpaid attorney fees, they typically get discharged (eliminated) in your bankruptcy along with many of your other debts.
Because your attorney can't try to collect his or her unpaid fees after filing your case, you will normally have to pay all attorney fees upfront before your case is filed. Further, unpaid fees can lead to conflicts of interest between debtors and their attorneys. As a result, many bankruptcy courts require attorneys to collect all of their fees before filing a debtor's Chapter 7 bankruptcy.
Many bankruptcy attorneys advertise that you can pay their fees through a payment plan. If you are filing for Chapter 7 bankruptcy, you can typically retain an attorney by paying only a portion of the total attorney fees upfront and setting up a payment plan for the rest.
When you retain a bankruptcy attorney, he or she will usually talk to your creditors or send letters to them on your behalf. However, your attorney will typically not file your bankruptcy case until you pay off the fees through your payment plan.
For more information on fees and costs associated with filing for bankruptcy, see Typical Cost of Bankruptcy.
If you are filing for Chapter 13 bankruptcy, you don't have to pay all of your attorney fees upfront. Chapter 13 bankruptcy is designed to allow debtors to pay back some or all of their debts through a three- to five-year repayment plan. One of the debts you can include in your repayment plan is your bankruptcy attorney's fees.
Most bankruptcy attorneys will ask you to pay a certain portion of their fees prior to filing your Chapter 13. The remaining fees will be paid through your repayment plan. The amount of fees you will need to pay upfront will vary depending on the attorney. But keep in mind that attorney fees are negotiable and make sure to discuss how much you will have to pay before the attorney will file your case.