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What Are the Costs of Filing A Bankruptcy?

Obviously, one of the first and for many potential clients, one of the most important questions that a client has is: how much is filing a bankruptcy going to cost me? I would start by telling anyone looking into filing a bankruptcy that the fee an attorney is going to charge you, while an important consideration, should not be your only consideration.  I have seen many people get themselves in even more trouble by hiring the cheapest attorney they could find to file a bankruptcy for them.  In fact, I have substituted into many of these cases to try to resurrect a case, after another attorney has botched it.  In these situations, it costs the client much much more in fees than they would have otherwise paid, if they actually hired a competent experienced bankruptcy attorney to handle their case, that may have been a bit more expensive, rather than the cheapest attorney they could find.

EXPERIENCE COUNTS

There is a reason that an experienced bankruptcy attorney may charge a little more to handle your bankruptcy case, and that is because their experience adds value.  They know what questions to ask you up front, so that they first of all advise you correctly regarding what chapter to file, and secondly, so that they can advise you of any potential problems or issues they see with your case, and how you can avoid these potential pitfalls.  I have seen it too many times before, where an inexperienced bankruptcy attorney has given incorrect advice or has been negligent in their representation, and their client has had assets sold by a chapter 7 trustee or their chapter 13 plan payment significantly increased.  These situations could have been avoided with the proper representation.  Those are the hidden costs of hiring an attorney that lacks experience and knowledge.

BEWARE OF HIDDEN COSTS

There are some attorneys who hide their fees.  They advertise $500 for a bankruptcy and then hit you with additional costs and fees once you retain them. It’s the old bait and switch. This is especially prevalent with Chapter 13 cases.  In a chapter 13, the attorney can have his fees paid over time as part of your plan of reorganization.  the standard fee in New Jersey for a Chapter 13 case is $3,500.00.  Most attorneys will take some of that fee up front and put the balance into your plan.  However, there are attorneys that will tell you they are only charging you $500 for the case and then they put $3,000 of their fee into the plan and never tell you they did this.  It does not indicate this arrangement in the fee agreement that you have signed, chances are you will never even realize you paid them another $3,000 unless you actually review the annual report that you will receive from the Trustee.

You will also need to beware of attorneys that will tell you that you have to be a chapter 13, even though you qualify for a chapter 7 case.  This is because they can charge you a higher fee for a chapter 13 than for a chapter 7 and then can spread that fee out over time in your plan, as I explained above.

Do you want to hire an attorney like this, that is not being forthcoming with you, and in fact, is not looking out for your best interest?  I doubt it, but many potential bankruptcy clients are so stressed out, for obvious reasons, that they are not looking at the big picture.  They are many times, looking for the fastest and cheapest way to get out of their situation.  This is where that old adage, if it seems too good to be true, it probably is, comes into play.  This is a very important decision you are about to make. You are making a decision that will impact your financial future.  You are deciding whether or not to file for bankruptcy.  You owe it to yourself and your family to be diligent with your decision.  You owe it to yourself to find an attorney that knows the bankruptcy laws and can advise you properly, even if that costs you a few dollars more up front, chances are it will save you a lot of money and anguish in the long run.

SO WHAT SHOULD IT COST?

An average fee for a Chapter 7 is about $2,000.00 for the attorney fee and the Court filing fee is $335.00.  At Capone & Keefe, our average fee is $1,750.00, however, depending on the particular facts of each case, that fee could be adjusted up or down.

As previously stated, the standard fee for a chapter 13 is $3,500.00 and the Court filing fee is $310.00.  At Capone & Keefe, we charge $3,500.00, we ask for a retainer of $1,750.00 and then agree to roll the balance of $1,750.00 into the Chapter 13 plan, so that our client pays that over time.

Believe me when I tell you there is not an attorney in New Jersey who is charging less than $3,500.00 for a chapter 13 case, if they tell you they are, they are not being forthcoming and you should be very careful about retaining them.

COULD THERE BE ADDITIONAL FEES?

Yes there could be, but more likely in a Chapter 13 case.  Because a chapter 13 plan lasts for anywhere from 36 to 60 months, obviously things can change.  A client may lose a job, or fall behind on their Trustee or mortgage payment, because of some unforeseen expenses, etc.  When a client falls behind on post-petition payments, inevitably a motion will be filed by the Trustee or the Mortgage company.  These motions will have to be opposed and additional Court appearances will have to be made.  Additional fees will be charged by your attorney for this work, as it is not contemplated or covered by the initial flat fee.

Again, be wary of any attorney that tells you there will be no additional fees, if motions or modifications have to be filed, again its just not true. The good news is that all additional fees have to be applied for by the attorney and approved by the Bankruptcy Court.  You, as the client,  must be given notice of the Fee Application and have the opportunity to object if you feel the fee being requested is excessive.

At Capone & Keefe, our fee agreement explicitly details what is included in the initial fee and what would be considered additional work and billed separately.  We feel that the client should be fully informed and aware of how they will be charged and when they may be responsible for additional fees.  We believe an open and honest relationship with our clients is the only way to practice and you should want and expect that from your attorney.

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