If you want to file for bankruptcy, but don't have the cash to pay your lawyer, can you use a credit card to pay your lawyer's fees? The answer is no. For the most part, bankruptcy attorneys will not accept credit card payment for attorney's fees.
Attorneys Cannot Advise Clients to Incur Debt Before Bankruptcy
Bankruptcy law prohibits attorneys from advising you to incur more debt on the eve of a bankruptcy filing. In fact, the attorney must provide you with disclosures about what he or she, as a "debt relief agency," can and cannot do. And one of the "can't do" items is advise you to incur more debt.
Even if you intend to pay the credit card charges, you are still incurring debt when the attorney processes the charge. An attorney that allows you to use a credit card to pay bankruptcy attorney's fees violates bankruptcy law, and could end up with severe penalties.
Some attorneys, however, take debit cards because those amounts come directly from your checking account deposits. Attorneys may also take credit cards from friends or relatives who are willing to pay the fee for you as long as that fact is disclosed in your bankruptcy paperwork.
Credit Card Charges on the Eve of Bankruptcy May Not Qualify for Discharge
Lawmakers recognize that some people thinking about bankruptcy may be tempted to run up their debts before filing a bankruptcy case. To combat this, bankruptcy law has provisions that make many of those last-minute debts potentially nondischargeable. In particular, one provision states that you may have obtained a debt through fraud, false pretense or false representation if you incur it expecting that it will be discharged in the bankruptcy. If the credit card company suspects that has occured, they could file a lawsuit in your bankruptcy case to challenge the discharge of the debt.
Using a Cash Advance to Pay Your Attorney
Some clients take out a cash advance to pay their attorneys. Keep in mind that if you take out cash advances, for whatever reason, totaling more than $925 within 70 days of filing bankruptcy, the credit card company could file a lawsuit asking the court to declare that the debt is not discharged in the bankruptcy. (To learn more, see Recent Luxury Debts and Cash Advances: Can You Get Rid of Them in Bankruptcy.)
Other Ways to Pay Your Bankruptcy Attorney's Fees
If you don’t have the cash to pay your bankruptcy attorney’s fees, consider these alternatives:
Stop making credit card payments. Some debtors stop making payments on their credit cards or other dischargeable debt until they have saved up enough to pay their fees.
Get a loan from a relative or friend. You can ask a friend or relative for the money. As mentioned above, your attorney can accept a credit card payment from someone other than you. Keep in mind, however, that you must list this loan in your bankruptcy paperwork.
Consider Chapter 13 bankruptcy. Even though you’re eligible to file a Chapter 7 case, you might consider filing a Chapter 13 bankruptcy case instead. In many jurisdictions, you can include part or all of your attorney’s fee in your Chapter 13 payment plan.
Get help from Legal Aid. Contact your local Legal Aid or Legal Services Corporation office to determine if you are eligible for reduced or no-cost representation because of your limited income.
Look for pro bono bankruptcy help. Use the American Bankruptcy Institute's Pro Bono Resource Locator to look for bankruptcy attorneys across the country who provide free or low-cost bankruptcy assistance. Help might not always mean representation.
Ask about a payment plan. Many bankruptcy attorneys offer payment plans for fees. Even if your attorney will allow you to pay your fees with a plan, he or she is not likely to file your case until you have paid the entire fee.
To learn more about paying your attorney’s fee, see Options If You Can’t Afford a Chapter 7 Bankruptcy Lawyer.