100% plan and expensive lawyer

[NYHusband]

Hi again! Wife and I are getting real close to filing now. About 45 days past due on all unsecured debt. Have some new questions.

Briefing:

Combined income: $156,000
Combined take-home: $96,000 ($8,000 per month)

Unsecured debt: $110,000
Boat Loan: $28,000 (worth maybe $13,000 - $425 per month payment)
Car 1: $350 per month
Car 2: $430 per month
Mortgage 1: $146,000 ($1250 per month with taxes)
Mortgage 2: $49,000 ($180 per month, cannot strip)
Student Loan 1: $25,000 ($180 per month)
Student Loan 2: $10,000 ($100 per month)

Met with the lawyer that we liked best after checking out a couple. He crunched numbers and came up with this:

100% payback of unsecured debt - $2,100 per month for 60 months, including his fee and trustee fee.

Everything else outside the BK. He said if we include student loans, it would be added to the $110,000 unsecured, increasing the payment over $600 per month. He said best to leave them out, pay minimum, and pay them off after the BK is over.

Boat - we wanted to let it go, but we're facing an $18,000+ deficiency on the loan if they auction the thing off. He said that will get added to the monthly payment anyway, and at that point we'll be almost paying the entire loan off with no boat to show.

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Bottom line:

Lawyers fee to file a 100% payback on only unsecured is $3,450. This seemed extremely high for paperwork I could bang out myself in a few hours. I would RATHER have a lawyer involved in case anything changes later, but that works out to almost $60 a month for almost no work on his part! This does not included the filing fee.

Trustee fee in our area is around 8.4% right now. That's $183 a month of the payment.

Does this all sound reasonable to everyone? Should I file pro se since it's a very basic, credit card only, 100% case? Should I seek out a cheaper lawyer?

THANK YOU bkforum for all the insight you've given me!

[NowImDownInIt]

That sounds pretty accurate to me. Attorneys that attempt to charge fees that are above normal on simple cases are often questioned by the trustee.

My plan was very straightforward and my attorney's fees were $3408. If that gives you any idea. I had a plan base of @ $27k with unsecured paid at 100%.

[NYHusband]

I guess I'm just doubting my choice in attorney now. The first one we seriously considered said there was no way we'd be at 100% (we walked in expecting to be) and was about $1000 less to file. We just didn't like his attitude (rolling his eyes and sighing every time we moved onto the next debt).

Our currently lawyers firm is not purely bankruptcy based - they practice multiple types of law. The cranky guy's practice was a high volume bankruptcy only firm. Maybe we'd be better off there.

[NYHusband]

Oh - and the current lawyer did some strange calculations on our car payments. Even though they're both well under the $496/month guideline, he said there's a formula you have to apply based on amount owed, months left on the loan, etc... and here's what the actual exemptions came out to be:

$350/mo car loan, only $228/mo exempt (46 months remaining on loan)

$430/mo car loan, only $340/mo exempt (63 months remaining on loan)

How on earth does that work??

[NowImDownInIt]

IDK about the formula, but I would go with a primarily bankruptcy focused firm. This way, you can be sure that whoever you end up with on the phone at least has an idea of what you are talking about and how to get you pointed in the right direction.

You said that you met with this attorney. Have you retained him yet? Is there another, non-cranky, attorney at the BK firm? My attorney is a little cranky too, come to think of it, but he's pretty good so I let it slide.

[HHM]

Even in a 100% payment plan, there is a ton of work in a chapter 13. Just because you are 100%, doesn't mean the trustee will automatically sign off; the rule is chapter 13 is that the debtor pay ALL disposable income into the plan. Also, when there is a 100%, the attorney should be doing a closer review of the Proof of Claims that get submitted and object to any for which there are grounds to object. The upfront fee you are being charged is, objectively, reasonable. The real question is whether the attorney is really going to provide you service. Keep in mind, the BK courts in each district have what is known as a "no look" fee. In chapter 13 BK, the attorneys must justify the fee they charge. Each district has established a minimum fee an attorney may charge for chapter 13 to cover the basics of a 13 without the attorney having to submit a detailed billing statement. If the attorney charges more than that no look fee, then they must submit a detailed invoice showing the work and time put into the case.

All said and done (even with 100% plan), the attorney fee for a chapter 13 ends up being around $5,000-$6,000. If the 13 has any complexities or issues, that fee can easily push $10K. The really hard core, good, chapter 13 attorneys will do absolutely everything to charge a fee such that your unsecured creditors get nothing, because the attorney fee eats is all up.

[Cristo]

On the means test, for the car payments you just take the amount you owe and divide by 60. I can't understand how the $430/mo payment becomes $340/mo when you have more than 60 months to go on it. There are not too many ch 13 filers that are in 100% plans unless they are trying to protect assets or they just want to pay back 100%. Usually if you can payback 100% you are not really bankrupt. You should check out NOLO's on-line means test calculator and do the numbers yourself. You should be able to do better than 100% payback if you want to. The lawyers I talked to all had fees in the $3500-4000 range.

[NYHusband]

We're not including the cars in the BK - they're just straight car loans (both are 0% interest loans). So what you're saying is you can't exempt the actual payment, but the loan balance divided by 60?

edit - something doesn't add up with our lawyers numbers then. The exemption on the $350 a month car is indeed the balance divided by 60, but the $430 a month car has works out to $473 exemption based on that calculation.

Blah - gonna go see the other lawyer and see what happens.

[Pandora]

Hi again! Wife and I are getting real close to filing now. About 45 days past due on all unsecured debt. Have some new questions.

Briefing:

Combined income: $156,000
Combined take-home: $96,000 ($8,000 per month)

Unsecured debt: $110,000
Boat Loan: $28,000 (worth maybe $13,000 - $425 per month payment)
Car 1: $350 per month
Car 2: $430 per month
Mortgage 1: $146,000 ($1250 per month with taxes)
Mortgage 2: $49,000 ($180 per month, cannot strip)
Student Loan 1: $25,000 ($180 per month)
Student Loan 2: $10,000 ($100 per month)

Met with the lawyer that we liked best after checking out a couple. He crunched numbers and came up with this:

100% payback of unsecured debt - $2,100 per month for 60 months, including his fee and trustee fee.

Everything else outside the BK. He said if we include student loans, it would be added to the $110,000 unsecured, increasing the payment over $600 per month. He said best to leave them out, pay minimum, and pay them off after the BK is over.

Boat - we wanted to let it go, but we're facing an $18,000+ deficiency on the loan if they auction the thing off. He said that will get added to the monthly payment anyway, and at that point we'll be almost paying the entire loan off with no boat to show.

------------------------------------------------------------------------------------

Bottom line:

Lawyers fee to file a 100% payback on only unsecured is $3,450. This seemed extremely high for paperwork I could bang out myself in a few hours. I would RATHER have a lawyer involved in case anything changes later, but that works out to almost $60 a month for almost no work on his part! This does not included the filing fee.

Trustee fee in our area is around 8.4% right now. That's $183 a month of the payment.

Does this all sound reasonable to everyone? Should I file pro se since it's a very basic, credit card only, 100% case? Should I seek out a cheaper lawyer?

THANK YOU bkforum for all the insight you've given me!

Okay maybe its just ME - but I'm not understanding something here. You are going to pay everything except your credit cards, outside of your BK - yet pay 100% on the debt (unsecured)?

Why are you even filing if you're going to end up paying $126K on $110K worth of debt? You really want to pay $16K extra?

What am I missing here?

[HHM]

Oh - and the current lawyer did some strange calculations on our car payments. Even though they're both well under the $496/month guideline, he said there's a formula you have to apply based on amount owed, months left on the loan, etc... and here's what the actual exemptions came out to be:

$350/mo car loan, only $228/mo exempt (46 months remaining on loan)

$430/mo car loan, only $340/mo exempt (63 months remaining on loan)

How on earth does that work??

Exemption is really the wrong word here...what the attorney is doing is actually reasonable. You have two choices.
1. have an increase in payment when the car loans expire prior to the end of the plan;
For example, if your chapter 13 plan payment is $2000, and you have a car payment of $350 per month that will end in month 36 of the plan, then the trustee will require the plan payment to increase to $2,350 in month 36. OR
2. do what your attorney is doing and average out the difference. (but not sure what the attorney is doing on the one that is longer than 60 months)

But I concur with the others, not really sure why you are filing BK in the first place if you could actually afford a $2,100 per month payment. You should probably look into consumer credit counseling.

[NYHusband]

Sat down tonight and made a budget of everything. Truth is, with all our fixed bills (utilities, insurance, loans that I listed...) it's cutting it so close it's scary. It would be tight but doable, except for one thing. Our house was built in the 40's and it eats money. Average bare minimum in repairs is usually $3000+ per year. After doing a very tight budget, taking less than the max exemptions for food and auto maintenance, I can only put away about $2000 for repairs. That's $0 other savings for non-house emergency, $0 401k, etc.

We're going to speak to the other lawyer to get a re-evaluation. We were already turned down by credit councilling - they advised bankruptcy.

[Cristo]

I'm glad you are doing the budget work. It's frustrating to have to think about switching lawyers but it can be money well spent. I had to dump a guy who told me I was "required" to pay 25% of my unsecured debt. Turns out he just tried to get his clients to do that so that he could get an easy confirmation and the trustee would not object. That way he made a lot of easy money and his clients got screwed. I'm glad I went with another lawyer as he has me in a plan to payback between 7-10% and it is more affordable for me. There is no way I could have done 25% as I also live in a money pit house.

If your budget is that tight you should be looking at a lower payback not lowering your expenses artificially to pay 100%. Talk to a few more lawyers. You will be surprised at how different they can be. It gets easier after the first couple. Think of it as a buisness conversation and go over all your options. You are allowed to contribute to your 401K and you should! I have a loan on my 401 that I payback and also I contribute 6% and neither was questioned by my trustee. Make sure you have adequate health, life and disability insurance. These things are more important than paying back the credit cards.

Good luck with your consultations.