CH13 dismissal and attorney fees

[sassiebaz]

If we dismiss our BK, are we still responsible for the rest of the attorney fees that would have been paid to our attorneys if we continued for the 3 years....Seems I remember giving about $2500 up front, but dont rmemeber the entire cost of the CH13.

[despritfreya]

What does the fee agreement you signed state?

[HHM]

Most likely yes.

Whether the attorney will actually pursue it, is another matter.

HOWEVER, this is the EXACT reason why I think it is a BAD idea to hire an attorney who rolls his fees into the plan. It creates this sort of conflict of interest.

[LadyInTheRed]

Aren't you going to file a Chap 7 after dismissing the 13? If so, I think the debt to your attorney will be discharged. Of course, you'll probably need to use a different attorney for the 7.

[MSbklawyer]

HOWEVER, this is the EXACT reason why I think it is a BAD idea to hire an attorney who rolls his fees into the plan. It creates this sort of conflict of interest.

I agree HHM, that rolling the fees into the plan is not the ideal arrangement. But speaking practically, it's a necessary evil. Almost nobody in need of the services of a bankruptcy attorney has the attorney fees (in the range of $2800) plus the filing fees ($274) plus the credit counseling / debtor education fees (in the range of $ 80) right on hand. Most bankruptcy clients show up at the door the day that they get their first garnished paycheck or the notice that their bank account has been cleaned out. Requiring $3200 of them up front is usually a hurdle they just can't clear.

I go into it with the knowledge that a certain percentage of the plans are going to fail or will insist on converting to a 7 shortly after filing. But there are warning flags that pretty reliably indicate how likely this is to happen and I adjust my up-front fee requirement, case by case, accordingly.

[despritfreya]

In addition to the comments made by MSbklawyer, a good percentage of 13's require more work than the "basic" fee. Those attorneys who charge a flat fee and then charge additional sums for lift stays, moratoriums, objections to POC's etc. would be out of luck if they simply charged one fee up front and nothing in the Plan. How would they get paid "outside the plan" for the additional work? For Firms such as mine, we charge on an hourly basis taking a retainer up front. Our final fee is normally higher than the average due to the complexity of the case we handle. How would we get paid?

Paying fees through the Plan addresses two issues 1) getting a consumer into the system at a relatively inexpensive rate and 2)guarantying that the attny gets paid so long as Plan payments are made thus allowing counsel to reduce fees up front. While there may be a conflict, such conflict is wholey outweighed by the benefit to both parties.

[HHM]

What I am saying is you should pay the attorney for the fee for the work that needs to get done before the case is filed up to confirmation. That should be paid up front. The extra stuff as despritfreya points out, that can be paid through the plan.

However, I think you are missing a major issue; if the client can't come up with the bulk of attorney's fee up front for BK 13 within a few months, that begs the question of whether chapter 13 is really the best option. Why do you think so many chapter 13's fail? Mainly, in tight plans, its the attorney rolling the fee into the plan which makes the monthly payment higher than it needs be, and if the person couldn't afford it up front, that means they really DONT have the resources to successfully complete a 13. The upfront fee is a test to determine if the client can really succeed in a chapter 13.

(on the business side, I have worked with firms that had the same fear you guys do, but when the go to upfront payment for chapter 13, they earn MORE money in the long run and are putting clients in the right option).

[LadyInTheRed]

plus the credit counseling / debtor education fees (in the range of $ 80) right on hand.

$80!? Unless the fees vary greatly by state, if that's what your clients are paying, they are paying too much. I paid $30 for the credit counseling and then found out I could have gotten it for less and even free. I paid $12.25 for the debtor education and there were many options within a couple of dollars of that.

While there may be a conflict, such conflict is wholey outweighed by the benefit to both parties.

I agree. In addition to the points despritfreya already made, by rolling part of the fee in the plan, the attorney has an interest in having the client complete the plan. It should encourage them to work for a realistic plan and to and work with a client when problems arise instead of being "unavailable" after confirmation.

In my court division, "Any retainer of more than $2,000 will be closely scrutinized by both the Chapter 13 Trustee and the Court", but they will scrutinize the total fee only if its over $4,800. So, the court is encouraging rolling a majority fee into the plan.

[LadyInTheRed]

However, I think you are missing a major issue; if the client can't come up with the bulk of attorney's fee up front for BK 13 within a few months, that begs the question of whether chapter 13 is really the best option. Why do you think so many chapter 13's fail? Mainly, in tight plans, its the attorney rolling the fee into the plan which makes the monthly payment higher than it needs be, and if the person couldn't afford it up front, that means they really DONT have the resources to successfully complete a 13. The upfront fee is a test to determine if the client can really succeed in a chapter 13.

Good point. I can see both sides of the issue.

[despritfreya]

Hot topic here...

In response to:

"What I am saying is you should pay the attorney for the fee for the work that needs to get done before the case is filed up to confirmation"

Most of the hours spent covers the above time frame. Such is not feasible if the total fee is closer to the 4 or 5K range. In addition, cases that require litigation require the litigation before the Plan can be confirmed. How is an attny to be paid for the litigation if not through the Plan? Paying fees (other than the up front retainer) is just not workable for most cases and, in particular, cases that require litigation.

In response to:

"I think you are missing a major issue; if the client can't come up with the bulk of attorney's fee up front for BK 13 within a few months, that begs the question of whether chapter 13 is really the best option"

I wish to point out that I think the major issue is timing. Most folks cannot wait 3, 4 or 5months to come up with 4k. They need to file "now". They need to stop the loss of a home, the repo of a vehicle or garnishment of wages and any other action that they, as a consumer, believe is causing them to lose sleep.

[MSbklawyer]

$80!? Unless the fees vary greatly by state, if that's what your clients are paying, they are paying too much. I paid $30 for the credit counseling and then found out I could have gotten it for less and even free. I paid $12.25 for the debtor education and there were many options within a couple of dollars of that.

$80 being the total cost for the credit counseling and the debtor education (not each). I know that you can get it free if you are unemployed, but where did you find it for $30 / 12.25?

PM the answer please, so we won't get lectured.

Thanks

[LadyInTheRed]

$80 being the total cost for the credit counseling and the debtor education (not each). I know that you can get it free if you are unemployed, but where did you find it for $30 / 12.25?

PM the answer please, so we won't get lectured.

Thanks

PM Sent.

Just for the record:

I was wrong about how much I spent for the credit counseling. I paid $45. But, I did later see a $30 course, which is why I was thinking I paid $30.

I am married filing alone. Married couples filing together will pay more.

I did online courses. Telephone courses cost more.

The bottom line is that it's worth spending some time going through the list of approved courses to find the best deal. I'm guessing that competition has increased since 2005 and prices have been driven down.

Debtors can get a list of approved providers for both courses at http://www.justice.gov/ust/eo/bapcpa/ccde/index.htm

[SMinGA]

For what its worth - I did an online course for $40, was no extra charge for joint.

[sassiebaz]

Well, my laywer doesnt know this but I don't plan on using him for my Ch7. They have made some mistakes in our case, still arent confirmed after well over a year. We haven't had to submit anything other than one thing that the trustee asked for. Other than that, just the initial paperwork....so not sure what I will do but I know I wont have the rest of the money to pay them if we dismiss our case and file ch7.

[biotechsolution]

If you aren't confirmed, you should be getting the monthly payment that you've been making back.