If you are considering a Chapter 7 bankruptcy, figuring out how much you'll have to pay your bankruptcy lawyer can be another source of stress. While every case is different, it's helpful to have a ballpark figure for what you can expect to pay a bankruptcy attorney to represent you in a Chapter 7 case.
What is average in your area might not be so average in another area. Attorney fees vary by district and can even vary widely from state to state. A recent study using data from 2005 to 2009 shows that the average fee for a Chapter 7 bankruptcy, nationally, is between $1,080 and $1,200. But when it was broken down by state, the average fee was as low as $700 in Idaho and as high as $1,530 in Arizona. Fees in the Southwest tend to be the highest, with fees in the Midwest generally among the lowest. Currently, fees ranging from $1200 to $2500 are considered ordinary, depending on your location.
The bankruptcy law gives judges the right to examine the fees charged by attorneys and order them refunded to the trustee if they are unreasonable. To avoid being flooded with cases requiring a review of fees, some courts have enacted local rules or guidelines setting “presumptively reasonable” or “no-look” fee amounts. These are more common in Chapter 13 cases, but some courts have set amounts that apply to Chapter 7 cases. Different courts use different terms but the effect is the same. If attorneys charge an amount equal to or less than the presumptively reasonable or no-look fee, the court will generally not initiate a review.
Review is not precluded. If additional information is presented which would cause the court concern, the court is free to review even a presumptively reasonable fee.
Not intended as a fee limit. In most instances, these presumptively reasonable or no-look fee amounts are not fee limits. Attorneys can charge higher amounts but will have to follow the procedure set for their particular court to have the fees reviewed and allowed. This would involve the attorney providing the court with information on why the higher fee is justified in that particular case.
If you see advertisements that promise unusually low attorneys fees for your area, be on alert. The advertisements might be deceptive. Often the attorney increases the quoted fee once you start the bankruptcy process. For example, the attorney might say he or she must charge you more because you have more than a threshold number of creditors, your debt is over some predetermined limit, or you are filing jointly with your spouse. However, these factors rarely make a Chapter 7 bankruptcy more complicated so do not usually justify a higher fee.
Number of creditors or amount of debt. While the fee charged often depends on the complexity of the case or experience level of the attorney, factors such as the number of creditors and the amount of debt should not, by themselves, change the fee you are charged. There may be exceptions for cases with very high numbers of creditors because of the time it takes to prepare the bankruptcy papers, but this is rare. It is not unusual for an average consumer bankruptcy to have thirty to forty creditors listed. An average small business bankruptcy could easily have double or triple that amount.
Individual vs. joint filing. The fact that you are filing jointly with your spouse, rather than individually, should not increase the fee. In fact, a case where a married person is filing individually and their spouse is not filing usually involves more legal analysis and is more complex than when both spouses are filing together.
Unfortunately, the fee quoted often does not tell you anything about the qualifications of the attorney. Many attorneys provide a free initial consultation or charge a small fee for the consultation which can be applied to the overall attorney fee if you do file. In addition to getting some free or low-cost legal advice, this is an opportunity to size up your prospective attorney.
Initial consultation. Your initial consultation should be with the attorney and it should be the attorney that provides you with legal advice. A good paralegal can do a lot of the work in a Chapter 7 bankruptcy but it should not include providing you with legal advice, even if it is inside a law office.
Getting a referral. Apart from meeting with the attorney, inquiring about qualifications, and feeling comfortable with the answers and advice you are getting, referrals from trusted sources are probably the best way to find a good bankruptcy attorney. Your accountant or another lawyer you trust might be able to direct you to someone they know and trust.
For articles on finding and hiring an attorney, see Getting Bankruptcy Help.