Most individuals filing bankruptcy are in financial distress. Finally, you decide that you need to seek professional help or at least a consultation with a consumer bankruptcy attorney. You explore the positives and negatives of filing bankruptcy, decide that it is the right path for you and ask: what will the bankruptcy cost me?
The attorney quotes you an attorney’s fee and disbursements for filing fee, credit counselling and debtor education, and you stare at the attorney and ask:
Where am I supposed to get that kind of money and when do I have to pay it?
Let’s deal with the “where do I get the money” first:
If you are filing a bankruptcy you are generally advised to stop making any payments against your credit cards, bank loans, past due medical bills, etc. You are advised to continue payments for any asset that you are keeping, such as a car, house, pension loans, rent, etc. This should immediately begin to free up money that you were otherwise paying creditors.
For those who are not working, or for those who have already ceased all payments to creditors, some individuals need to turn to relatives or friends for partial or full payment of the fees and disbursements required in a bankruptcy.
Now let’s deal with payment plans:
Most bankruptcy law offices offer payment plans. Generally a bankruptcy takes 4-6 weeks to prepare and the payments can be spread over that period. Or, additional time can be afforded for payment when requested early on in the preparation of the bankruptcy petition.
And, there are differences in payments required for Chapter 7 and Chapter 13 petitions.
In Chapter 7, your lawyer cannot collect any money from the client against fees or disbursements after the filing of the bankruptcy. It is prohibited by law. Therefore, all fees and disbursments must be paid prior to the filing of the petition.
In a Chapter 13, which is a wage earners plan where payments of part or all of the debts are paid through the court, a portion of the fee can be put into the chapter 13 plan payment making it easier on the client to expedite the filing of the bankruptcy petition.