How bankruptcy attorneys make money

[lorelei]

I've heard a couple times now that attorneys make more money on a Chapter 13 compared to a Chapter 7. Can someone explain how that is? Does a Chapter 13 attorney receive some sort of ongoing fee through the five-year payback?

[lorelei]

Ack. I meant to post this in the General *Bankruptcy* forum. Can someone please move it? Sorry for the inconvenience.

[espo1357]

I've heard a couple times now that attorneys make more money on a Chapter 13 compared to a Chapter 7. Can someone explain how that is? Does a Chapter 13 attorney receive some sort of ongoing fee through the five-year payback?

Ya, they make 3-6X more on the Chp 13. Some lawyers will try to get you in a 13, when you can file a 7, so you can strip the second mortgage...

well, its BS. If you qualify for the 7, do that, and then settle with the second (assuming you are under). If the second gives you a good deal and you want the home, then go for it.

If the second doesn't give you a good deal, then walk.

At least that is what I am going to do. My greedy lawyer gave me bad advice because he wanted to make more off of me (I can see this more clearly after a year). Although, at the time I wanted to keep the home. However, now the home is just keeping me in slavery, and I want to go back to the 7. I should have done a 7 when I had the chance, and then settled with the second.

Just understand that lawyers are no bargain and get as much information as possible before you move forward.

[Flamingo]

A chapter 13 attorney costs more because there is more involved than in a Chapter 7 and also the attorney represents the client for 3 to 5 years (whatever the term of the plan). A good BK attorney will take the time and explain to you right off the bat, after going through ALL your financial and debt information, what is the best course for you to take and whether or not you should even consider debt consolidation. A good attorney will listen to what you want or what assets you may want to keep (i.e., house) and let you know whether or not it will all work in your particular circumstances. Of course if you go to one of those firms that advertise on the local cable channel at 2:00 a.m. you will get what you pay for...If one wants good representation, call your State Bar Association (in your phone book under the state section) and ask for references for the best BK attorneys in your area.

[msm859]

A chapter 13 attorney costs more because there is more involved than in a Chapter 7 and also the attorney represents the client for 3 to 5 years (whatever the term of the plan). A good BK attorney will take the time and explain to you right off the bat, after going through ALL your financial and debt information, what is the best course for you to take and whether or not you should even consider debt consolidation. A good attorney will listen to what you want or what assets you may want to keep (i.e., house) and let you know whether or not it will all work in your particular circumstances. Of course if you go to one of those firms that advertise on the local cable channel at 2:00 a.m. you will get what you pay for...If one wants good representation, call your State Bar Association (in your phone book under the state section) and ask for references for the best BK attorneys in your area.

The State Bar will NOT make any references as to who might be a "good" attorney. They will only tell you if a particular attorney has had any disciplinary actions. The best way to find a good attorney is from references from people who have used them or perhaps another attorney who practices in a different field -- they usually know who the good attorneys are.

[HHM]

Yes and no on the chapter 13 more money issue. The reality is, easily 50% of BK attorneys won't go near a chapter 13. Reason being chapter 13 represent about 3-4 times more work and time than a chapter 7. So, although the attorney may "charge more", chapter 13's are not always more profitable.

Also, it depends on your district. Each district as what is known has a no-look fee. The BK system over sees what attorneys charge for BK's. In a chapter 13, an attorney must submit his billing records. To help streamline the process, the judges and UST get together and decide that an attorney may charge $X amount for a chapter 13 so long as they provide "y" level service and not have to submit records. In most districts, the no look fee is actually much lower than what an attorney actually spends on a case, so the attorney must submit billing records to justify the fee. But, they must also do the work.

So, for chapter 13's to be profitable, the attorney must have a very efficient system for handling cases (because you cannot do as many 13's as you can 7's). To do a chapter 13 right, the attorney needs to budget about 24 hours of total time. At $250 per hour, that is $6,000. If an attorney does less than that, then that attorney isn't maximizing the benefit of a 13 to the client.

But yes, there are firms that treat chapter 13's like glorified 7's. Do the bare minimum to get the higher fee...those firms give chapter 13's a bad name and are one of the causes (albeit a minor cause) for the high failure rate of chapter 13's in general.

[kornellred]

My own Chapter 13 attorney explained to me that there is an absolute maximum fee which an attorney can charge for a Chapter 13 filing. In 2007, when I retained my attorney, it was $3500 plus the filing fee. My attorney charged me the maximum allowable, and mine was a simple, no-asset case.
For complex cases where debtors have businesses, properties and other assets, there are legal procedures which must be attended to prior to filing, so I imagine that these procedures are accounted for on an a-la-carte basis, separate from the Chapter 13 fee.

[DYLAN150]

The attorney I saw two weeks ago want to charge me $3500 for a chapter 13, with $750 up front and the rest included in the plan. A friend of mind just did a very very simple chapter 7 and the attorney charged him $1100 plus something like a $270 filing fee.

[BKAttyMI]

While a basic chapter 7 case is generally very simple, a chapter 13 case is very complex and requires specialized knowledge and experience in this area. Any attorney can pick up chapter 7 cases on the side, but only experienced attorneys can see a chapter 13 case and get it confirmed. As stated above, many attorneys don't even try the 13s because of the difficulty level. The chapter 13s also require two hearing appearances (341 meeting and an actual confirmation hearing in front of a judge) whereas a 7 requires just an appearance at a 341.

Depending on what you're trying to accomplish with the bankruptcy case (save a house, dump debt, pay taxes, etc.), a 13 may or may not be the right way to go. It's always good to speak to an attorney experienced in 13s before making a decision what is the best option for you.

[papie]

This thread makes me lol.

I actually feel like my attorney is under paid for my Chapter 13. For $3500 he remains my lawyer for the length of my plan and his paralegals are at my fingertips whenever I have a question.

I'm sure there are some crappy firms out there, but I can't say enough about my attorney and his staff. The paralegal usually answers my petty questions within five minutes if I e-mail her. For the first six months of our plan I always had a stupid question like "I got this letter from so and so AND I'M FREAKING OUT!!!" Anyone who puts up with me over the course of this plan deserves more than $3500.

[lorelei]

Thanks Papie. And I think that's the kind of attorney/client relationship I'm looking for.

[MSbklawyer]

I can't imagine a lawyer steering a client to a 13 when they are eligible for 7. Yes, the fees for 13 are more, but that's assuming you get paid, which is not always a foregone conclusion since the bulk of the fees are paid through the plan, and there are 3 to 5 years for things to go wrong. I will stand on my head to get a borderline client into a 7 -- first because it's the better option for the client and second because I get paid up front and I'm done with it in about 3 months as opposed to 3 to 5 years.

I have put chapter 7-eligible clients into 13s when they just couldn't possibly pay any fees up front because of wage garnishments, car repossessions and similar circumstances. But under the heading of "A fee in the hand is worth two in the bush", it just simply doesn't profit an attorney anything to steer 7-eligible clients into 13s.

[espo1357]

I can't imagine a lawyer steering a client to a 13 when they are eligible for 7. Yes, the fees for 13 are more, but that's assuming you get paid, which is not always a foregone conclusion since the bulk of the fees are paid through the plan, and there are 3 to 5 years for things to go wrong. I will stand on my head to get a borderline client into a 7 -- first because it's the better option for the client and second because I get paid up front and I'm done with it in about 3 months as opposed to 3 to 5 years.

I have put chapter 7-eligible clients into 13s when they just couldn't possibly pay any fees up front because of wage garnishments, car repossessions and similar circumstances. But under the heading of "A fee in the hand is worth two in the bush", it just simply doesn't profit an attorney anything to steer 7-eligible clients into 13s.

How about if the client has pre-paid legal?

My "friend" had that has was steered to a 13, when she was eligible for a 7. Kicking herself now.

[MSbklawyer]

How about if the client has pre-paid legal?

My "friend" had that has was steered to a 13, when she was eligible for a 7. Kicking herself now.

Ok, but you're from Alabama, so first an Alabama joke or two:

An Alabaman came home and found his house on fire, rushed next door, telephoned the fire department and shouted, "Hurry on over here. My house is on fire!"

"OK," replied the fireman, "how do we get there?"

"Say, don't you fellers still have them big red trucks?"

AND

Did you hear that the governor's mansion in Montgomery, Alabama burned down?
Yep. Pert' near took out the whole trailer park.

HAAAAAAAAAAAAAAAAAAAAAAAAAAAAHHHHH!!!!

But to answer you question, I have never, in all my years of practicing bk law, had a client who paid all their chapter 13 fees up front. I suppose getting paid up front for a 13 would present a temptation, but I still wouldn't do it. I can make a good enough living doing right and not cheating people. And I truly believe that what goes around really does come back around.

[ValleYum]

HAAAAAAAAAAAAAAAAAAAAAAAAAAAAHHHHH!!!!

Pssssst: The governor's mansion in Alabama would be in Montgomery.

Funny jokes... for an Ole Miss Rebel.

War Eagle!