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Kentucky’s Covington division opened the door for people filing bankruptcy petitions to make payments on their bankruptcies

Posted on Friday, February 26th, 2021 at 9:04 am    

A recent opinion from Judge Wise in the Eastern District of Kentucky’s Covington division has opened the door for people filing bankruptcy petitions to make payments on their bankruptcies. You can read the full text of the opinion here.

So how do payment plans work? First, let’s talk about the difference between Chapter 7 and Chapter 13 bankruptcy. If you have a Chapter 13 bankruptcy, Lawrence & Associates already gives you a payment plan. You’re required to pay your court filing fee and the cost of pulling your credit report up front. Court fees change occasionally, but this has been less than $400 for years now. Attorney fees are paid as part of your monthly payment to the bankruptcy trustee, and each monthly payment is the same. So in Chapter 13 bankruptcies, you automatically have a payment plan.

Chapter 7 bankruptcies are different because you don’t make any payment to the Trustee. On top of that, if you still owe your bankruptcy attorney money when you file the bankruptcy, then you just declared bankruptcy on your attorney too. Your attorney isn’t allowed to collect. This means that all Chapter 7 bankruptcy attorneys used to be required to collect their entire fee up front. If they didn’t, they were stuck with whatever money they’d accepted on the front end. Judge Wise’s opinion is important because it upends the old way of doing things and provides a blueprint that allows Chapter 7 bankruptcy filers to file without having to get all the money up front.

The most important thing to realize if you intend to have a payment plan on a Chapter 7 bankruptcy is that you are going to agree to separate different parts of the bankruptcy that ordinarily go together. Although there’s probably more than one correct way to do this, Lawrence & Associates divides the services up like this:

Before Filing Contract After Filing Contract
Consultation Preparing and Filing All Bankruptcy Schedules
Preparing and Filing a Bankruptcy Petition Preparing and Filing the Means Test and All Other Required Bankruptcy Documents
Preparing and Filing a List of Creditors Gathering and Providing Necessary Documents to the US Trustee and Chapter 7 Trustee
Preparing and Filing an Application to Pay the Filing Fee in Installments Attending Court with You
Reaffirming Debts with Secured Creditors
Making Installment Payments on the Filing Fee

If you don’t have a payment plan and choose to pay the entire attorney fee, court costs, and credit report fee up front, then both columns are completely covered by that payment. But if you choose to have a payment plan you’ll sign a contract that covers just the items in the first column for as little as $300 in attorney fees. That gets your bankruptcy filed and gets the automatic stay in place to stop your creditors from garnishing you. But if you don’t also do all of the things in the second column, your case will be dismissed! You aren’t required to use the same law firm to complete the things in the second column; in fact, you aren’t required to use a lawyer at all! But you should be aware that some of the things in the second column must be done within as little as seven days after filing your bankruptcy, so you’ll have limited time to educate yourself if you decide to go it alone.

If you decided to retain Lawrence & Associates to complete the items in the second column, you’ll have a second meeting with your attorney and sign a second contract that covers those items. That second contract is accompanied by a form that allows us to take a deduction from your bank account once each month for 12 months. There’s no money owed on the second contract other than the monthly deduction. Having a payment plan is slightly more expensive than paying everything up front, because the law firm must keep the case open for longer and because the firm runs a risk of not getting paid over time. But payment plans give hard working people the opportunity to get a fresh start without dodging garnishments and law suits while they try to save up enough to file.

We can set up a payment plan for any Chapter 7 bankruptcy we file in Kentucky. Unfortunately, Ohio courts have not allowed this option yet, so we are not able to set up payment plans for Ohio bankruptcies. If you think a Chapter 7 payment plan is right for you, give Lawrence & Associates a call!

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