Why stop paying CC's and wait to file?

[pcn]

I have read several posts about people who stop paying their cc's for several months before filing. Why? After you file you stop paying, so why not file right away to get the process moving? Is it just for those who may have a charge too recent in their history that they want to "age" past the time limit? Thank for helping me understand.

[wonkettegirl]

For some folks, that's the only way they can save up for attorney's fees, if they are hiring an attorney. For others, they may be, as you mention, putting some time between their last usage of the cards and filing. For me, I used the money I wasn't spending on my mortgage/cc to pay my attorney, buy winter coats and boots for my children, and have some dental work done.

[kenshirley]

I agree, for many that are about to file it's the only way they can get the money together as they are already up to the limits for payments.
I had to really search to find a quality attorney around here for $1500. Many wanted $2500 and more.
It's going to make no differnence if you are going under anyway as the account will be listed as included in the BK.

[pcn]

Thanks, that makes sense. So if Im leaning toward ch13, that would not be a good option, since I believe we need to be current on out mortgage to qualify for ch 13.

[Trixie007]

Thanks, that makes sense. So if Im leaning toward ch13, that would not be a good option, since I believe we need to be current on out mortgage to qualify for ch 13.

Well, you would not stop paying on anything you want to keep, only things that will be discharged.

[kenshirley]

Unsecured stop paying them.
If it's something you want to reaffirm make the payments but make sure you understand the rules behind that and that you can afford to do it.

[pcn]

I can see as a reason needing to save up to pay for the atty. Is that only in the case of a ch7 though? Here in AL for a ch13 we have to pay around $250 upfront for the filing fees and a credit report, i believe. But the rest is rolled into the payments. Is that normal for most states?

Edit: should have added - ch7 payment is required up front from what I can tell.

[kenshirley]

I am not sure.
I know I talked to 6 attorneys before I made my selection. Two were really idiots in my opinion from what I had researched on my own.
I spent a few minutes talking to each and asking a couple simple questions and they all wanted the money up front before they would file.

[liz417]

We are filing ch 13 and our attorney doesn't "roll" his fees into the BK. Bummer. Anyway, that's the delay for us. Retained him in May '08 and hope to be filed this month or early next month....Yeah!
If I had to do it all over again, I would have FOUND this site first, then interviewed a few attorneys and found one that "rolled" the fees into our ch 13 payment...oh well

[keepmine]

Thanks, that makes sense. So if Im leaning toward ch13, that would not be a good option, since I believe we need to be current on out mortgage to qualify for ch 13.

In a 13, you don't have to be current but, you must pay the arreage back at 100% in the plan as well as make the regularly scheduled mortgage payments.
As a pratical matter, if you have stopped paying all unsecured debt and you still can't stay current on the mortgage you have something you really can't afford regardless of which chapter you file.

[HHM]

I personally don't like the "rolling in" of fees in a chapter 13. But I know why attorneys do it. But here are the problems.

1. The bulk of the fee (The total fee) is actually earned before the case is ever filed, thus, you are creating a potential conflict if you don't file your case; the attorney has done the work and you haven't paid.
2. Rolling of fees creates a counter incentive for the attorney to put you into a chapter 13 when a chapter 7 may be an option. It puts borderline cases in a 13 when they were viable 7's because the attorney earns more money in a chapter 13.
3. It creates a potential conflict of interest if you stop making payments in your 13 and you haven't finished paying your attorney.

Now, attorneys roll fees more as a cash management tool for debtors because many debtors cannot afford the upfront fee for a 13, but you should at least understand the risk associated with such a tool.

The rolling of fees is a business model for high volume filers who can churn easy chapter 7's and put any questionable cases in a 13. Not exactly the type of firm I would want to work with.

[pcn]

Thanks for everyone's advice. We're current, for now, on everything. Exploring all our options, trying not to miss any opportunities that may be out there.

[liz417]

I personally don't like the "rolling in" of fees in a chapter 13. But I know why attorneys do it. But here are the problems.

1. The bulk of the fee (The total fee) is actually earned before the case is ever filed, thus, you are creating a potential conflict if you don't file your case; the attorney has done the work and you haven't paid.
2. Rolling of fees creates a counter incentive for the attorney to put you into a chapter 13 when a chapter 7 may be an option. It puts borderline cases in a 13 when they were viable 7's because the attorney earns more money in a chapter 13.
3. It creates a potential conflict of interest if you stop making payments in your 13 and you haven't finished paying your attorney.

Now, attorneys roll fees more as a cash management tool for debtors because many debtors cannot afford the upfront fee for a 13, but you should at least understand the risk associated with such a tool.

The rolling of fees is a business model for high volume filers who can churn easy chapter 7's and put any questionable cases in a 13. Not exactly the type of firm I would want to work with.

Thanks HHM for explaining the pros and cons of "rolling payments into a ch 13" because I never really understood why some attorneys did it and some didn't. A poster here (a Paralegal) had made comments in the past about attorneys that require payments upfront...she would tell us to "run"...but now, I don't feel as dumb that my attorney requires payment first and yes, my attorney is NOT a "BK Mill" as some posters have experienced. As you say, "you get what you pay for"...

[pcn]

Thanks HHM. Can you please explain more on #2, I don't understand that one.
How does the rolling of fees give them incentive to put people in 13's? I understand that they make more on a 13, but not why the fees would make a difference. A 7 would seem to be a better option for them, exactly for the reason you list in #1. (The atty we're talking to currently actually wants to steer us to a 7, but I'm concerned about his "alternative lien stripping theory" in the 7. I think you replies to that thread as well )

[HHM]

Generally speaking, attorneys that do the "roll in" charge significantly less for a chapter 7 than a chapter 13 (in most districts, the court sets the maximum fee an attorney may charge for a chapter 13 for the "Basic" services). Thus, often times, the chapter 7 quote is a teaser quote. Now, they will do a 7 for that lower fee (but with all sorts of add-ons if the case is not simple), but if there is any way they can get you into a 13, they will try. The chapter 7 fee is often the same as the "up-front" fee for the chapter 13. And since you don't actually "feel" the fee for the 13, because it is rolled into the chapter 13 plan, it makes it easier for the attorney to recommend a 13.

Thus, an attorney that recommends a 13 knowing you will need to pay the fee up front is, on average, doing you a favor because they know you can go to another attorney and get the fee rolled in, so the advice is more likely to be accurate because they are risking you going to a "cheaper" attorney.

In any event, something to think about when you decide on an attorney.