$599.00 Bankruptcy Scam

I get several calls a week from potential clients who are price shopping. I have nothing against price shopping - in fact, I encourage it. I try to be as upfront as possible about my pricing, which you can read about under "Pricing & Guarantee." That said, almost every week I get a call from a potential client who practically hangs up on me after advising me my price is too high because they saw an ad in the paper, billboard, Pennysaver, or wherever for $599.00. Don't fall victim to this scam. It is extremely unlikely you will get competent legal representation for this price. How does this scam work? First, let me say it is not necessarily $599.00. It could be a couple hundred more or a couple hundred less, but, either way, you'll typically find yourself in one of the following scenarios:

FIRST, THE UP SELL: Some attorneys advertise a super low price, intending to provide very little in the hopes that they can sell the extra services other attorneys normally include in their quotes. For example, there's a well-known local attorney who advertises "$499.00 Bankruptcy." Sounds like a super deal, right? But, all he actually does for this price is prepare your bankruptcy petition and you represent yourself. If you want him to go to court with you, it is another $500.00. If that was not enough, he charges $85.00 for a credit report (we charge $35.00). and another $110.00 for the required pre-bankruptcy credit counseling and post-filing debt education courses (our cost is $24.00). If you want to reaffirm your car or home loan, he charges another $100.00 (here, it is free with our standard service).

So, if you hire this "$499.00" attorney and ask him to go to court with you, it will cost you a minimum of $1,500.00, when you include the court's filing fee of $306.00 ($499.00 + $500.00 + $110.00 + $85.00 + $306.00 = $1,500.00). If you hired me to do the exact same thing, it would cost you $1,364.00 ($999.00 + $24.00 + $35.00 + $306.00 = $1,364.00). So, what I advertise for $999.00 actually turns out to be $136.00 less than the "$499.00" lawyer. If you wanted to reaffirm a car loan, I would be another $100.00 cheaper because here it would be free!

SECOND, THE SWITCHEROO: This is a combination of several situations I will group together for the sake of brevity. Some lawyers advertise a low Chapter 7 rate, then try to sell you on a Chapter 13 when you get to their office. $4,000.00 for a Chapter 13 attorney fee is standard, four times what is typical for a Chapter 7 nowadays. Several times a year I do a Chapter 7 for someone who came into the office after another attorney told them they absolutely, positively, could not qualify for a Chapter 7.

Just recently, I filed a Chapter 7 for a nice retired couple whose income consisted of Social Security and withdrawals from an IRA. An attorney from one of the "nation's oldest legal networks" told them they had no choice but to file a Chapter 13, because the court would require them to keep withdrawing from their IRA at the same rate they had been. That was nonsense for several reasons, but mainly because had they kept withdrawing at their previous rate, their IRA would have been exhausted in less than 24 months.

Other attorneys advertise a super low price, but have so many restrictions that most people will never qualify for the advertised rate. A lot of their ads start with verbiage like "Bankruptcy from...," "Starting at..." or something similar. Typically, if you call their office, they won't commit to a quote until you come down in person. Then, once you get there, it is " you don't qualify for the cheap price because you make too much money," " you have too many creditors," " you owe too much, you own a home, you're self-employed, you have/had more than one job, you're married, etc... ".

For example, coincidently, I recently had some other nice retired folks as clients. Their only income was about $1,100,00 each in Social Security - period. They hired a firm that advertised a "$599.00 Chapter 7" on a big sticker that came right on the front page of the Orange County Register. However, when they went to the firm for a consultation, they were told it would be another $500.00 because they were married. True, it is more work to represent a couple than an individual, but, usually, not by much. I typically charge an extra $100.00, but in this particular case, it would have been so easy that I would not even have charged them that. In fact, in this case, I not only did not charge them extra, I gave them a couple hundred dollars off.

You see, these nice folks signed up with the "$599.00" firm. They paid them a total of $1,393.00 with the filing fee. After that, they couldn't get in touch with their attorney. They tried for months. Their calls went to voicemail and were not returned. Finally, they had to file a complaint with the State Bar of California. Exasperated and not knowing what else to do, they came to me. Not only did I charge them less than their $599.00 lawyer, I got their case filed within 24 hours.

LASTLY, THE WHO OR WHAT DID I HIRE? These scams come in two general varieties. First, there are non-attorney/legal document preparation services that advertise in such a way as to mislead people into thinking they are lawyers. Second, there are attorneys who do little other than sign up clients and let their staff do all the work.

With regard to legal document preparation services, I almost always advise against their use. It is against the law for a document preparation person to give you legal advice. All they can do is transfer information from a questionnaire onto your bankruptcy forms. In the right circumstance, it is very easy for a potential debtor to put down information on his or her bankruptcy questionnaire that can cause all sorts of problems, including the loss of assets, objections to discharge, dismissal of their case, fines, or criminal prosecution. Do not hire a document preparation service. If you do, know what you are doing. Read a book on doing your own bankruptcy first. Then, if you hire someone, do not pay more than $100.00 for labor (these documents can usually be typed up in less than one hour).

Now to my colleagues. Many attorneys today, particularly in the "bankruptcy mills " or "networks", are more sales people than attorneys. In the "mill" situation, it is common to meet with an attorney who sells you on using their firm, but once you have signed up, you never get to see or speak with them again. Your case gets assigned to some low-paid data entry person whose job it is to review your questionnaire, prepare your petition, file your case, and arrange representation at your hearing.

I say “arrange representation” because many of these mills use appearance attorneys. Attorneys who, for as little as $50.00, will sit with you during your hearing. These are contract attorneys who work for a number of lawyers. These attorneys know little of your case, they do not know you, and you do not know them. If you have a significant question, they will not answer it, they will just refer you back to your attorney. You know, the attorney who signed you up and with whom you have never spoken since.

In extreme cases, you may even pay for a lawyer and never actually meet them. My office is in Huntington Beach and close to me are offices for two of the biggest bankruptcy firms. Over the years, I've signed up a number of clients that consulted with those firms first. Many of these clients informed me that their consultations were not held with an attorney, but with a paralegal. In the most recent case, my new clients informed me the offer had been made to have their potential attorney "teleconferenced" in, when they asked to meet with him.

Do not pay attorney prices if an attorney is not doing the majority of your work. A $599.00 advertisement might sound tempting, but, in truth, you are often getting little more than a document preparation service. Most folks will find that they ended up paying MORE money and did MORE of the work just to receive substandard representation in return.