Posted on Tuesday, March 20th, 2018 at 2:35 pm
Hiring a bankruptcy attorney can be expensive. Although Lawrence & Associates doesn’t charge any upfront fees for a Chapter 13 bankruptcy, many other Northern Kentucky* law firms charge up to two thousand dollars before the bankruptcy is filed. All law firms charge the court’s filing fees and any costs related to credit counseling or credit reports up front, and these expenses generally run in the range of $350, depending on the number of people filing bankruptcy. And Chapter 7 bankruptcies always have fees that must be paid up front, before the bankruptcy is filed. For Lawrence & Associates, a Chapter 7’s fees and costs are generally around $1,350 depending on the number of people filing bankruptcy. (This includes the court’s filing fee and the cost of pulling a credit report.) Again, other Greater Cincinnati law firms charge a wide range of fees that can go as high as $3,000. Other kinds of bankruptcy can be even more expensive.
So what does the bankruptcy attorney do to justify these fees? When you are shopping between local law firms and deciding who you should hire, how can you compare what services are being offered to know whether your hundreds or thousands of dollars are being wisely spent? We’ve recently written articles that give potential clients tips about how to choose an attorney based on reviews, history with the bar association, membership in attorney organizations, and the attorney’s actions at the consultation. This article will discuss the various, generally reoccurring parts of a bankruptcy attorney’s job to give some insight as to how attorneys earn their keep.
Pre-Filing Work – Gathering Documents and Filling out Schedules
I often tell my clients that 90% of bankruptcy work is preparing things to be filed correctly. If a bankruptcy is well prepared, it leads to far easier hearings and often a quicker resolution for the client. If a bankruptcy is poorly prepared, it can lead to seizure of the client’s assets, failure to discharge some debts, or even allegations of bankruptcy fraud. Attorneys earn their fee before the bankruptcy is even filed, even if that is not where the majority of their time is spent.
There is a long list of documents that Lawrence & Associates’ clients are asked to gather before the bankruptcy is filed. Many of these documents are inaccessible to anyone but the client, or getting a copy of the document would take far longer for the attorney than it would for the client. They include copies of:
- Driver’s License and Social Security Card
- Credit Counseling Course Certificate
- List of Creditors Not on the Credit Report
- Six Months’ Bank Statements
- Six Months’ Proof of Income for the Household
- Recorded Deed, Mortgage, and PVA Value for any Real Property
- Certificate or Memorandum of Title for any Vehicles
- Proof of Insurance for any Vehicles
- Two Years’ Tax Returns
- Life Insurance Policies
- Divorce, Child Support, or Child Custody Orders/Agreements
Each of these documents plays an important role in preparing for the bankruptcy. Each must be provided to the Trustee within seven days after the bankruptcy is filed, so it is crucial that the attorney gather them ahead of time. It is important for the attorney to not only review these documents and use them to prepare the bankruptcy forms and schedules, but also to understand how the information within them can affect the bankruptcy filing. The bankruptcy rules are formed by Section 11 of the United States Code, and those rules fit together to form the best bankruptcy possible for our client. Knowing how to fit the rules together is often like trying to make a puzzle when you know you have all the pieces, but don’t know what the eventual picture should look like. Again, this is where the attorney earns his or her keep!
At Lawrence & Associates, we recently joined the 21st Century and set up a portal for our clients to use when submitting paperwork and other information about their bankruptcy. Many attorneys still have clients schedule one or more appointments during business hours to come into the office to provide this paperwork and information. We decided that, since most of our clients are working and struggling to make ends meet, it was harmful to ask them to take time out of their workday for a function that could be performed outside normal business hours if it was done online. For clients who are not comfortable using the online portal, we still schedule face-to-face appointments in the office. In addition, we are willing to do consultations either over-the-phone or face-to-face.
After the bankruptcy paperwork is prepared, all bankruptcy attorneys must have a face-to-face appointment to sign all the bankruptcy documents and file them with the court. This meeting is mandated by the bankruptcy rules. During this meeting, the bankruptcy attorney should fully explain what is in all the documents, what will happen after the bankruptcy is filed, and what effect they expect the bankruptcy to have on your assets, debts, and credit score. Expect this meeting to take from one to three hours, depending on the complexity of the bankruptcy.
The 341 Creditors’ Hearing, the Confirmation Hearing, and other Court Hearings
All bankruptcies have at least one hearing, called a 341 hearing or creditors’ hearing, and this is often the most nerve wracking part for the client. However, it is nothing to worry about if the bankruptcy has been well-prepared! These hearings are typically scheduled for a ten to fifteen minute period of time, and a month’s notice is given prior to the hearing so everyone can take off work. At the hearing, the client will be placed under oath, but all the questions are generally simple confirmations of the client’s asset and debt situation – “Is it true the 2013 Camry is the only car you own?” – or canned questions that are asked of everyone regardless of their situation – “Have you lived in Kentucky for the last two years?” It is common at these hearings for the Trustee to tell the attorney that he or she would like to see more documentation, or would like to see a change in the bankruptcy filing. Such requests are generally easy to accomplish, and have a minor effect (or even no effect) on the bankruptcy itself. It is the attorney’s job to comply with the Trustee’s requests.
Chapter 13 bankruptcies also have confirmation hearings, but it is very rare that a client would have to attend one of those. In fact, in Northern Kentucky it is very rare for the confirmation hearing to have to occur at all! Generally, good communication between the attorney and the Trustee eliminates the need for this hearing.
Finally, there may be many more hearings for a bankruptcy depending on whether additional issues arise. Such hearings are uncommon in Chapter 7 bankruptcies, but common in Chapter 13 bankruptcies. Such hearings may arise when creditors object to confirmation or discharge, when our client has to object to a creditor’s fraudulent proof of claim, or when our client needs to temporarily suspend plan payments. It is the bankruptcy attorney’s duty to represent the client at all such hearings, even if they occur months or years after the fee is paid. Particularly for Chapter 13 clients, several years may go by between hearings. Chapter 13 clients should never worry about being charged by their attorney for calling with simple questions about their bankruptcy payment.
In all hearings, it is wise to have an experienced bankruptcy attorney who files a lot of claims. Knowing the bankruptcy rules is one part of successfully navigating bankruptcy hearings, but knowing the Trustee is just as important! Chapter 7 and Chapter 13 Trustees have their own viewpoints on what is reasonable and what is not, on how laws should be interpreted, and on what is best practice in bankruptcy cases. By knowing the Trustee’s proclivities, the attorney can simplify and speed up the bankruptcy, and can often maximize the amount of income the client can keep (in a Chapter 13) or the number of assets the client can keep (in a Chapter 7).
If you have any other questions about what a bankruptcy attorney should be doing for you, please call our Fort Mitchell, Kentucky office at 859-371-5997. We are one of the largest bankruptcy filers in Northern Kentucky and we have helped over 3,000 clients. We’re Working Hard for the Working Class, and we want to help you!
*Northern Kentucky includes the following counties: Boone, Kenton, Campbell, Gallatin, Grant, Pendleton, Bracken, Mason, and Robertson. Each of these counties reports to the federal court in Covington.