Options If You Can't Afford a Chapter 7 Bankruptcy Lawyer

Many debtors struggle to afford the fees charged by attorneys for Chapter 7 bankruptcy. But payment options exist. If you can't afford a Chapter 7 bankruptcy lawyer, you'll want to consider other strategies that might work for you when filing for bankruptcy. For instance, you can stop paying debts that will get wiped out in bankruptcy and pay your attorney instead, or borrow the fees from a friend, family member, or even your employer.

Filing on your own is always an option, or if your income is low enough, you might qualify to obtain assistance from a free clinic, legal aid society, or pro bono attorney. You'll also learn why paying your bankruptcy lawyer with a personal credit card isn't an option, although someone else can use a credit card to pay on your behalf.

Borrowing Attorneys' Fees

After meeting with a bankruptcy lawyer, most people feel great relief and want to start the bankruptcy process immediately. If you don't have the funds to pay your legal fees, it's common to turn to friends and family for help, sometimes even employers.

Many people are understanding when it comes to a request for help with bankruptcy fees. It could be because it's cheaper to help someone resolve a financial problem once and for all by using bankruptcy, rather than providing ongoing assistance.

Before reaching out to your friends and family, consider learning how much the average Chapter 7 costs and how much bankruptcy lawyers charge for Chapter 13.

Paying a Bankruptcy Attorney Instead of Certain Creditors

When you file for Chapter 7 bankruptcy, the court and your creditors assume you'll stop paying bills that will be "discharged" or wiped out and use the funds to pay legal fees instead. For instance, credit card payments, medical bills, past-due utility payments, and personal loans (such as payday loans) usually qualify for a discharge.

However, if you stop paying dischargeable debts and use the funds for legal fees, it can be challenging to catch up if you later learn you're not eligible for bankruptcy. Before using this strategy, you'll want to meet with a bankruptcy attorney who can help with the assessment to ensure you qualify for Chapter 7.

If you want to keep a house, a car, or another type of property that you're paying for on credit and have pledged as collateral to secure a loan payment, you'll need to stay current on the payment before and after the bankruptcy. Otherwise, the lender will be able to take the property. So, continue paying the mortgage or car payment unless you're willing to lose your home or car.

Other Required Fees

Filing for bankruptcy involves costs other than attorneys' fees. Bankruptcy filers must take two educational courses and pay a filing fee. However, low-income filers can often get both waived.

The bankruptcy filing fee is an amount due when you file your initial paperwork with the court clerk. The fees change periodically, but you can find the current cost for both Chapter 7 and Chapter 13 cases in Bankruptcy Filing Fees and Costs.

If you plan to file for Chapter 7, you might qualify for a fee waiver if your income is within 150% of the federal poverty guidelines. Otherwise, you might be able to pay the fee in up to four installments. To apply, you'll complete and submit the official request forms along with your initial bankruptcy petition. The court will notify you if the judge approves the waiver or installment arrangement.

If you opt for an installment plan, making timely payments is essential. Otherwise, the court might dismiss your bankruptcy filing. You'd have to file a motion asking the court to reopen your case and pay the entire filing fee. A fee waiver isn't available in Chapter 13.

Retaining a Lawyer to Field Creditor Calls While Making Payments

The automatic stay order that stops creditors from collecting doesn't go into effect until you file the bankruptcy case. However, once you hire an attorney, you can cut down on annoying calls by instructing creditors to call your lawyer instead of you.

Some lawyers will let you pay a retainer as low as $100 and the remaining attorneys' fees in installments. Creditors must contact your lawyer when you're represented, so this approach will cut down on annoying creditor calls while you save for your attorneys' fees. Still, it won't stop creditors from engaging in other collection activities, such as garnishing wages or levying against a bank account.

Although many lawyers offer payment plans, whether a lawyer will file your case before you pay the entire legal retainer will depend on whether you file for Chapter 7 or Chapter 13. A Chapter 7 lawyer won't file your Chapter 7 case until you pay all legal fees fully and for a good reason. The bankruptcy filing would wipe out any amount owed to your attorney.

A Chapter 13 lawyer might file your matter after you've paid as little as $100. Bankruptcy rules allow lawyers to be paid the remaining balance owed through the Chapter 13 plan.

Filing for Chapter 7 Bankruptcy Without an Attorney

You aren't required to have an attorney when filing for bankruptcy relief. Whether you should, however, will depend on how complicated your case is and how comfortable you are researching the law and filing on your own.

Generally, individuals with a straightforward case will be better equipped to complete a Chapter 7 bankruptcy without counsel. For instance, if your income is low and you pass the first step of the Chapter 7 means test (the test you'll take to qualify for a Chapter 7 discharge), you have little or no property, you can wipe out all or most of your debt, and your creditors aren't likely to allege fraud against you, preparing your case will be possible.

However, bankruptcy laws are involved, and filing for bankruptcy without a lawyer isn't easy. If you aren't willing to invest the necessary research time, you'll risk losing unprotected (nonexempt) assets. Or, you might learn that your debts won't be eliminated in bankruptcy.

All Chapter 7 cases require you to fill out extensive bankruptcy forms, research exemption laws to protect property, and follow all local court rules and procedures. Consult a bankruptcy lawyer if you are uncomfortable doing the work and assuming the risk.

If you'd like to file on your own, consider using a reputable bankruptcy self-help book. You'll find step-by-step instructions on how to file for Chapter 7 bankruptcy in How to File for Chapter 7 Bankruptcy, by Attorney Cara O'Neill (Nolo).)

Free Clinics, Legal Aid, and Pro Bono Attorneys

Resources are available to debtors who can't afford a bankruptcy attorney, but they vary depending on where you live. Some bankruptcy courts offer free clinics to assist debtors in filing for bankruptcy relief on their own. Contact your bankruptcy court to determine the services offered or for a list of free services or programs available in your area.

Legal aid societies and pro bono attorneys provide free legal services or assistance to low-income individuals in most states. Contact your local legal aid society, state bar, or bankruptcy lawyers to find out about aid for people who wish to file for Chapter 7 bankruptcy but can't afford an attorney.

Filing for Chapter 13 Bankruptcy

Filing for Chapter 13 bankruptcy allows debtors to pay all or a portion of their attorneys' fees through their repayment plan, which can be great if you can't pay all the attorney fees upfront. However, this chapter doesn't work for everyone.

It's primarily for higher-income debtors who don't qualify for Chapter 7 and can afford to pay back a certain amount of their credit card balances and other unsecured debt. Or for filers who need to catch up on mortgage arrears, back car loan payments, or tax debts. If you don't have enough income to afford to pay into a Chapter 13 plan, you won't qualify.

Furthermore, bankruptcy courts typically don't allow Chapter 13 cases that are designed to pay only attorney fees through the plan, and this reasoning is sound. You would have to pay the Chapter 13 bankruptcy trustee a percentage you wouldn't pay in Chapter 7, which would make financing the fees using Chapter 13 more costly than it might seem.

Can You Pay a Bankruptcy Lawyer With a Credit Card?

The answer is yes and no. Yes, you can pay your lawyer's retainer using someone else's credit card, assuming they agree. However, you can't use your credit card to pay your legal fees.

Attorneys can accept credit cards from friends or relatives willing to pay the fee on your behalf, and this happens regularly. The only requirement is to disclose who paid for your legal services in your bankruptcy paperwork, which is the case anytime someone pays on your behalf, regardless of how the payment is made.

A bankruptcy lawyer can't allow you to pay for fees using your credit card. Bankruptcy lawyers can't advise you to incur more debt shortly before a bankruptcy filing for anything other than necessary services, such as food, gas, and warm clothing. Charging unnecessary luxury items and services on a credit card or taking out cash advances shortly before bankruptcy can get you into trouble, even if you intend to pay the credit card charges.

So, while your lawyer will happily accept a credit card payment for fees paid on your behalf, don't expect your lawyer to accept your credit card.

You'll Get Stuck Paying Credit Card Charges Made Shortly Before Bankruptcy

Lawmakers recognize that some individuals considering bankruptcy might be tempted to accumulate debt before filing a case, which wouldn't be fair to creditors. Bankruptcy law has provisions that make many of those last-minute debts potentially nondischargeable.

For instance, there are two ways a creditor could challenge a charge made shortly before filing:

• a luxury item purchased on credit or cash advance might be considered presumptive fraud, and
• any credit purchase made when you have no intention to repay the debt could also be fraudulent in bankruptcy.

In either case, the creditor could file an adversary proceeding (lawsuit) in your bankruptcy case to challenge the discharge of the debt. However, charging necessary items, such as food and clothing, is permissible, provided they're needed and reasonably priced.

Need More Bankruptcy Help?

Did you know Nolo has made the law accessible for over fifty years? It's true, and we wholeheartedly encourage research and learning. You'll find many more helpful bankruptcy articles on Nolo's bankruptcy homepage. Information needed to complete the official downloadable bankruptcy forms is available on the Department of Justice U.S. Trustee Program website.

However, online articles and resources can't address all bankruptcy issues and aren't written with the facts of your particular case in mind. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.