THE PAYMENT PLAN
Most people contemplating bankruptcy do not have a lot of available cash. Unfortunately, in a Chapter 7 case, any debt that is dischargeable on the date your case is filed will be discharged upon successful conclusion. For most cases, that means any amount you agreed to pay your attorney for handling your Chapter 7 case will be discharged if not paid before your case is filed. This is why almost* all Chapter 7 attorneys insist on getting "paid in full" before filing your case. It is not that we do not trust you, it is simply because we would wipe out our own bill if we handled your case right.
When you see advertisements that say "low down and easy monthly payments" or "$99.00 to start", know that no actual bankruptcy case is going to be filed for this amount. These amounts refer to what it will cost to initially retain the attorney's service. Do not get me wrong, retaining an attorney for a low down payment is generally a good thing, so long as the ultimate cost is reasonable. What I do not like are firms that make it sound like your case is going to get filed for a minimal amount, then explain why not when you get to their office.
So, how are payments handled in our office? Glad you asked. Typically, you would come in for a free consultation. Then, if you wanted to retain my office, I would have you put down a $99.00 retainer (but you do not have to do it then, you can take as long as you like to think about it). Once you have paid your retainer, I am now your attorney. This allows you to refer all your creditors to me. So if you have collection agents calling you morning, noon, and night, or, even worse, at work, you can tell them I am your attorney and I have instructed you not to speak with them and that any questions should be directed to me. This should buy you some cheap peace of mind, or at least a little quiet. Under the Federal Fair Debt Collections Practices Act, it is unlawful for debt collectors to contact you once you have advised them you retained an attorney in regards to their debt. So for $99.00 you will get the debt collectors off your back.
Also, once you have communicated to your creditors that you have an attorney (and they have confirmed this), it is a lot less likely that they will sue you. This is because they do not want to waste the cost of preparing, filing, and serving a lawsuit if you really are going to file, as these extra costs are generally wiped out in bankruptcy as well. This can be a great benefit to a debtor who needs 6, 9, 12 months to file, but is worried about a judgment getting rushed through that would allow a wage garnishment, bank levy, or a lien to be placed on their real property
Once you have put $99.00 down (or more if you like), you can send in payments at your convenience or bring in the entire balance when you are ready to file. We just ask two things. First, do not send payments of less than $100.00. Creates too much administrative expense tracking them and we certainly do not want to pass that on to you. Second, you must pay your balance within nine months or there is an additional $100.00 charge to extend your retainer another 9 months. This covers the additional time and effort required to field phone calls from your creditors. I am flexible on this, so if it turns out to be 9 1/2 or 10 months, I am not going to charge you the extra, but I wouldn't push it over 10. Unlike a lot of attorneys who are looking for an opportunity to ding you for a few extra bucks, I am quite the opposite. Once you have made your last payment or have your balance in hand, call to schedule a final appointment. It is that simple.
*Contrary to what you might have heard, it is illegal for an attorney to bill you or demand payment for preparation of your bankruptcy petition after your Chapter 7 bankruptcy case is filed. With limited exception, whatever a debtor owes on the day they file bankruptcy is discharged when their case comes to a successful conclusion. There is no exception for the fees due your attorney for preparing and filing your case - period. If an attorney attempts to bill you in this situation, they are in contempt of court, either by violating the automatic stay that went into effect upon your filing or by violating the discharge injunction that was created on your discharge.
When an attorney gives you credit to file bankruptcy, they become your creditor (creating an impermissible conflict-of-interest). In such circumstances an attorney would be duty bound to advise you that you do not have to pay their bill. Recently, several firms tried to circumvent the law by accepting "post dated" checks from their clients, only to be successfully sued by their clients or the Office of the United States Trustee.
If you run into an attorney that says you can enter into a binding agreement to pay Chapter 7 attorney fees (for preparing and filing your petition and schedules) after your case is filed, do not walk, run from their office.