I CAN'T AFFORD TO FILE BANKRUPTCY!
By Mark E. Henze
This is a common question:
I’m not doing well financially. How can I afford to file bankruptcy, what’s more pay an attorney to help me through?
The real question is: can you afford not to? Looking back, many people find that they are in their financial predicament due to being “penny wise and dollar foolish.” Starting in 2005, bankruptcy became a very complicated and difficult area of the law. This is not the time to risk more (and likely permanent) financial problems by ending up with a “messed up” bankruptcy case. We (Bob and Mark) cringe when we see bankruptcy Trustees collecting assets that should have been protected, when we see cases dismissed when they should have been prepared properly, and when we see cases that were filed with no efforts to strategize prior to filing. While there are a few cases (simple Chapter 7 cases only), where no strategizing would have helped, they are few and far between. The Courts now even require that a Disclosure form be provided to prospective clients warning them about cheap “petition preparation” or “bankruptcy assistance” service. But it’s not only the non-attorney “typists” that cause clients trouble. It can also be an inexperienced attorney who has been selected because of a lowball fee. Selecting a young former divorce attorney who is now taking a bankruptcy case here and there (since he’s not getting enough new divorce cases) can be a big mistake.
OK, but you haven’t answered my question. I have no money. How can I hire a bankruptcy attorney? Here are a couple suggestions:
1) Most cases will require at least $1,500 before the case can be filed. Yet, take a look at the amount of debt that you are discharging and will not have to pay. Would anyone turn down an offer to pay $1,500 to save $30,000 or more? It simply makes financial sense to do it right.
2) A good attorney will strategize with you to find out the best time to file your case. In many cases, the best choice will be to get the case ready and wait for the most appropriate time to file it. That may be several (or many) months down the line. If so, you can pay the fees off over a period of time ($100 - $200 per month?). While the fee does need to be paid in full prior to filing your case, you may be best off getting good strategic advice and representation over time while putting off the date that the case will be filed in a way to serve you best. Only an experienced attorney will know this. The petition preparer (non-attorney), the cheap attorney, and the large bankruptcy Mills will simply want to get your case filed immediately, collect their fee and be done with you as soon as possible. They’ll insist that you hurry to get filed … even if it is not in your best interest. Some even insist that their low fee only applies if you file within a short time span after meeting with that attorney.
3) When you look at the financial return mentioned above, it often makes sense to find the funds to do the case right. You’d be surprised what friends, relatives (and even employers) are willing to help out with either a gift or loan if you ask. Instead of thinking less of you, most will use it as an opportunity to finally open up and discuss the financial problems that they’ve had in the past. Additionally, once you have your finances under control and ready to be discharged, you’ll likely be able to concentrate once again on being a friend and a good employee. Again, remember that it’s a good financial investment and once your debts are discharged, you always have the right to voluntarily pay back those who helped you.
4) Check to see what other source of funds you may have. You may have a retirement plan or a cash value life insurance plan that you can take a loan from. Some will allow you to take a distribution where there is no loan to pay back, but be sure to be aware of the tax consequences of doing this. Do you have that old car or other old assets that has some value but is cluttering up your life? Can you sell it?
5) Finally, remember that as you plan to file your case, chances are that your attorney will suggest that you stop paying some of your bills in the meantime. This is a necessity in many cases. An experienced attorney will know which bills you should stop paying … and which ones you should keep up to date while your case is waiting to be filed. If you have been paying in the past on a debt that you have now stopped, use what you save from not paying that bill to get your case ready to go.
6) Remember that the cheap petition preparer or attorney can cost you much more in the long run. Sadly, we see so many cases where a $200 to $800 fee ends up costing $10,000 or more in correcting mistakes and losing funds and assets that you didn’t realize were at risk. And finally, in many, many cases, we see clients who went in to visit with a petition preparer or attorney who advertised a cheap fee and then walked out paying $2,000 or more after they discovered all of the “add-on” charges that weren’t originally disclosed. In many cases, the person simply thought this is the way all petition preparers and attorneys worked and were not willing to take the effort to get a second opinion. But in reality, it's called "bait and switch" advertising.
For a free in office initial consultation, call Henze & Associates, P.C. at