How bankruptcy attorneys make money

[MSbklawyer]

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

I was just testing ya. You passed.

[HHM]

But to answer your 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.

It depends on business practice and the no-look fee. Generally, the firms I work with, I advise that they get the no look fee up front. If you have a good value proposition in general, and are a good attorney, you can get it. Those clients that can't pay the no look fee up front have such a high degree a failure rate in their chapter 13, that its not worth taking the case (from a business perspective). So, in that respect, the ability to pay up front becomes a qualification for the type of BK. Generally, I have two reasons for this, (1) avoid potential conflict of interest with client. If you roll your fee into the plan for work ALREADY performed, and the client doesn't pay or can't pay, or fails within 6 months, the client needs your help, but you the attorney haven't been paid for work already done, (2) as mentioned, it is a qualification test, a person that cannot pay the no look fee upfront is probably not a good candidate for chapter 13. Most BK attorneys gasp when I present this, but trust me, the firms that implement it are more profitable and more importantly, the attorneys have more time. The main objection is the "FEAR" that they can't compete because EVERY OTHER attorney does it that way. But that is the whole point, you differentiate yourself from EVERY attorney by doing it differently, and if you can sell that difference, you will be just fine. The other way you justify it is this...if my (the attorney) taking attorney fees in your plan would increase your plan payment, then I won't take the additional attorney. I can practically guarantee that no other attorney in your area offers such a promise. But, by getting the no look fee up front, you have been paid for all the basic tasks of a chapter 13, up front.

[MSbklawyer]

It depends on business practice and the no-look fee. Generally, the firms I work with, I advise that they get the no look fee up front. If you have a good value proposition in general, and are a good attorney, you can get it.

I would be completely out of the Chapter 13 business if I required the full no-look fee up front. Our no-look fees are $2800 here. Plus the filing fee, $274; plus the credit counseling, plus the fee to pull a real credit report, and we're knocking on $ 3500's door. Ninety percent of my clientel have never seen $3500 in one place in their whole lives. Literally. Or if they have, they did hard time for it. But they have seen $1000, and they've got $1000, and they're standing there with it in their hands trying to give it to me so that they can get the garnishment stopped / car un-repossessed. It's a REAL emergency to them. They don't have a way to work without the car or money to buy both food and keep the lights on if wages are being garnished.

But your point is well taken. There is one attorney here in town that takes 13s for NO money up front and applies to have the filing fee paid in installments. He gets a lot of cases, to be sure, but he spends an inordinate amount of time filing motions to suspend plan payments; motion to reinstate cases that have been dismissed, etc. I try to strike a balance by adjusting the up-front fee according the liklihood of plan completion. The biggest factor in that determination is how long they've been at their job. I've got about a 70% plan completion rate, and the ones that don't complete are usually in the plan for some time before they fail and I get most of my fee.