Average Attorney Fees in Chapter 7 Bankruptcy

If you're considering filing for Chapter 7 bankruptcy, it's important to figure out how much you'll have to pay your bankruptcy lawyer. While every case is different, it's helpful to have a ballpark figure in mind when hiring a bankruptcy attorney to represent you in a Chapter 7 case. Also, you'll want to know what you should expect to receive for that price.

Bankruptcy Attorney Fees Vary by Location

What is average in your area might not be so average in another area. Attorneys' fees vary by district and can even vary widely from state to state. Even so, fees ranging from $1200 to $2500 are considered ordinary. But don't be surprised if you find a lawyer to represent you for as low as $700. And that might be a good deal if you have a straightforward case with no potential issues (you can protect all of your property, you have a small number of creditors, and you can wipe out, or "discharge," all of your debt).

Presumptively Reasonable or "No-look" Fee Amounts

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 usually won't initiate a review.

• Review isn't precluded. 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 a higher fee but will have to follow the procedure set for their particular court to have the fees reviewed and allowed. The attorney will provide information justifying the higher fee for that specific case.

Check with the local rules of your court to find out more, or contact the court clerk.

Check Out Unusually Low Advertised Fees

If you see advertisements that promise unusually low attorneys' fees for your area, be on alert. The advertisements might be deceptive. The attorney might use an a la carte system to increase the quoted fee depending on the services you need. For example, the attorney might 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.

Many attorneys live up to their advertised promises, however. As with anything, do your homework. Ultimately, you'll want to select the attorney you're most comfortable with whose fee is within your price range.

Fee Amounts Don't Necessarily Correspond to Attorney Qualifications

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.

What Your Bankruptcy Lawyer Should Do for You

Before you hire your bankruptcy attorney, you'll want to evaluate whether the professional will deliver the level of service you need. You can expect that a bankruptcy lawyer will evaluate your financial situation and assess whether filing for bankruptcy makes sense for you. Specifically, bankruptcy attorneys determine whether you'll be in a better financial position after your filing and if so, help you get through the process smoothly.

You'll want to be sure that the bankruptcy lawyer addresses these important issues.

Which Bankruptcy Chapter Can You File?

Most attorneys will begin the evaluation by qualifying you for the most common type of bankruptcy, a Chapter 7 case. If you don't meet the income standards, if you need to save a house or car, or it won't take care of your debt problem, you'll need to file a Chapter 13 bankruptcy and make monthly payments into a three- to five-year plan.

You can expect the bankruptcy lawyer to ask the following preliminary questions (the questions will differ for business bankruptcy):

• your marital status
• the number of dependent children living in your home
• your income (and the income of your spouse, if you're married)
• where you work
• where you've lived for the past two years
• whether you've filed taxes for the previous four years (this isn't necessary in every case), and
• whether you've filed bankruptcy in the past eight years.

Is Your Bankruptcy Filing Urgent?

Sometimes time is of the essence, and a bankruptcy lawyer will want to know whether it's important to file your case immediately. To determine this, a bankruptcy attorney will likely ask you whether you're:

• involved in any lawsuits
• facing foreclosure or eviction
• have a pending wage garnishment
• have had any money taken from your bank account
• concerned about a vehicle repossession, or
• have another pressing issue.

Is Your Property at Risk?

Because you can protect (exempt) only so much property in bankruptcy, it's also essential for an attorney to fully understand the extent of your property holdings. Although most people can keep everything in bankruptcy, it isn't always the case. If you stand to lose some of your assets, the lawyer will help you determine whether the overall debt reduction offered by bankruptcy will outweigh the loss of property.

Some of the questions listed in the section above—such as your involvement in a lawsuit—will provide the attorney with asset information (and likely prompt the attorney to ask more questions). You can also expect a lawyer to inquire about the following:

• whether you've been injured in an accident in the last two years
• the amount of money in your bank accounts
• stock, profit sharing, or retirement balances
• the cash value of a whole life insurance policy
• whether you anticipate receiving an inheritance
• the value of personal property, such as vehicles, sporting equipment, and collections, and
• the value of any real estate you own.

Will Bankruptcy Take Care of Your Debt?

Some types of debt—called nondischargeable debt—won't go away in bankruptcy. An attorney will carefully review your bills and explain what you'll be able to discharge (wipe out).

However, even if all your debt is nondischargeable, bankruptcy still might be a good option. An attorney will explain that you can spread out your overdue bills over three to five years in Chapter 13 bankruptcy and that your creditors won't be able to harass you during that time.

Before advising you about your options, the attorney will likely inquire about the following types of debt:

• unsecured debt, such as credit card balances
• past due taxes
• domestic support arrearages, such as child or spousal support
• student loan obligations
• mortgage balances, and
• vehicle loan balances.

An Attorney Evaluates Your Case for Potential Problems

You'll disclose additional information that a bankruptcy attorney will look over carefully, such as your monthly expenses and prior property transactions. Throughout your case, the attorney is always considering whether the bankruptcy trustee—the person responsible for overseeing your matter—will suspect bankruptcy fraud. (Although fraud isn't a problem in most cases, a bankruptcy attorney's job is to steer a client away from problems, and therefore it should be—and usually is—the bankruptcy attorney's first concern.)

For instance, higher-than-average expenses might lead the trustee to believe that a debtor is overestimating monthly bills in an attempt to avoid paying creditors. Or, the trustee might inventory a storage facility or bank deposit box to make sure that the debtor has accounted for all property.

An Attorney Will Be Your Advocate During Your Case

Once you file your case, you'll need to provide documents to the trustee and attend a 341 meeting of creditors. A bankruptcy attorney will ensure that the necessary papers get to the trustee in a timely fashion and attend the creditors meeting with you. If any issues arise, you'll have a knowledgeable partner to guide you through the process and ultimately, help you obtain the discharge that will wipe out your dischargeable debt.