Should I File for Chapter 13 If I Can't Afford a Lawyer for Chapter 7?

Learn about the pros and cons of "fee-only" Chapter 13 bankruptcy cases.

If you can't afford a Chapter 7 bankruptcy attorney, should you file a "fee-only" Chapter 13 bankruptcy? In a fee-only Chapter 13, you file for Chapter 13 solely so you can pay your attorney fees through the Chapter 13 plan. Read on to learn more about why this happens and whether it's a good idea for you.

Why an Attorney Might Recommend a Fee-Only Chapter 13

In general, attorneys will not file a Chapter 7 bankruptcy case until all of their fees are paid in full. This is because if an attorney files your Chapter 7 bankruptcy while you still owe fees, he or she will be treated as an unsecured creditor in your bankruptcy and the unpaid fees will typically be discharged.

If you can’t afford the upfront attorney fees for Chapter 7 bankruptcy, some lawyers encourage clients to file for Chapter 13 bankruptcy and pay the attorney fees through their repayment plan.

(Learn about the difference between Chapter 7 and Chapter 13 bankruptcy.)

Benefits of Filing for Chapter 13 Bankruptcy

If you can’t pay your attorney fees upfront for Chapter 7 bankruptcy, filing for Chapter 13 can allow you to get immediate relief from creditors while paying the remainder of your attorney fees through your Chapter 13 plan.

Chapter 13 Bankruptcy Allows You to Pay Attorney Fees Through Your Plan

Unlike Chapter 7 bankruptcy, Chapter 13 allows you to pay all or a portion of your attorney fees through your repayment plan. This means that you can still file your case even if you have not paid your attorney in full. Because Chapter 13 plans typically last between three to five years, you can pay off your attorney fees by making small monthly plan payments during your bankruptcy. (Learn how the plan works in our Chapter 13 Repayment Plan area.)

Chapter 13 Bankruptcy Provides Immediate Relief from Creditors

When you file for bankruptcy, the automatic stay protects you against most creditors because it prohibits them from continuing their collection efforts against you. However, the automatic stay doesn’t go into effect until your bankruptcy case is filed. This means that creditors can still pursue you and attempt to collect their debts until your case is filed. If you can’t afford to pay all attorney fees for Chapter 7 bankruptcy upfront, filing for Chapter 13 can provide you with immediate relief from creditors while paying off your attorney fees through your plan. (Learn more about bankruptcy's automatic stay.)

Disadvantages of Filing for Chapter 13 Bankruptcy

While filing for Chapter 13 bankruptcy has its advantages, it also has many drawbacks and may not be an option for every debtor. The following are some of the disadvantages of filing for Chapter 13 bankruptcy if you can’t afford a lawyer for Chapter 7.

Some Bankruptcy Jurisdictions Don’t Allow Fee-Only Chapter 13 Cases

If the only reason you are filing for Chapter 13 bankruptcy (rather than Chapter 7) is to pay off attorney fees through your repayment plan, you are filing what is called a fee-only Chapter 13. Certain bankruptcy courts don’t allow debtors to file fee-only Chapter 13 cases. Other courts don’t automatically forbid fee-only plans, but take into account any special circumstances surrounding your case when deciding whether to approve your bankruptcy.

You Don’t Receive a Discharge Until You Complete Your Repayment Plan

In most Chapter 7 cases, you receive your discharge within a few months. If you file for Chapter 13 bankruptcy, you will have to make monthly plan payments to a bankruptcy trustee for three to five years. You will only receive your discharge after you complete all of your plan payments.

Chapter 13 Bankruptcy Is Usually More Expensive

In general, Chapter 13 bankruptcies are more complex and require more work than Chapter 7 cases. As a result, attorneys typically charge more for a Chapter 13 than a Chapter 7. In addition, Chapter 13 cases have more administrative expenses (such as trustee fees) because the bankruptcy trustee must administer your case for three to five years. This means that a portion of your plan payments is used to pay trustee fees and other administrative expenses.

What Are Your Other Options?

If you can’t afford a Chapter 7 bankruptcy attorney and filing for Chapter 13 is not the right choice for you, you still have many other options to consider. Depending on the complexity of your case, you may be able to file for Chapter 7 bankruptcy on your own, obtain assistance from a free clinic, or find a pro bono attorney who will file your case for free.

To learn more about your options, see Options If You Can’t Afford a Chapter 7 Bankruptcy Lawyer.

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