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If you are considering bankruptcy, the cost of hiring an attorney may concern you. Bankruptcy court does not determine the fees; it only provides guidelines. Lawyers set their own rates, typically a flat rate in bankruptcy, though some attorneys charge an hourly rate. Another factor is whether you file Chapter 7 or Chapter 13 bankruptcy.
Chapter 7 Bankruptcy Attorneys
If you file Chapter 7, the bankruptcy trustee cancels most, or all, of your debts. However, your assets may be sold to repay your creditors. The cost of filing Chapter 7 depends largely on how complicated the filing, as well as the number and amount of your assets. Additionally, household income often plays a role in determining attorney fees.
On average, Chapter 7 bankruptcy attorney fees start at around $500 on the low end, rising to $3,500 for more complex cases. Pricing also varies according to geography and firm size. Larger firms tend to charge higher fees, and attorney fees in urban areas are typically higher than those of attorneys in smaller towns or in rural areas. Finally, attorney experience also dictates cost. Attorneys experienced in handling Chapter 7 bankruptcy cases charge higher fees than those who are new to the field.
Chapter 13 Bankruptcy Attorneys
Filing Chapter 13 bankruptcy allows you to keep all of your property and requires you to pay either all or a portion of your debts. Typically, you get three to five years to make these payments. This arrangement gives Chapter 13 its other name: reorganization bankruptcy.
Attorney fees for Chapter 13 follow guidelines designated by the court. These guidelines vary by judicial district, as well as whether you are an employee or a business owner. Fees range from $2,500 to $6,000 and do not require full, up-front payment.
The upfront amount varies by attorney but averages at about half of the entire fee. This is paid prior to filing your case, with the remainder paid via your payment plan.
Some bankruptcy attorneys charge by the hour instead of with a flat fee. An average hourly rate is around $200 per hour, though some attorneys charge as low as $100 an hour and others $500 and more. Again, experience and location play a large role in determining hourly rates.
Hourly attorneys typically charge in either 15-minute or 6-minute increments of time. Charges for tasks performed on your behalf add up quickly; charging in smaller increments of time saves you a good chunk of money over the course of your case. For example, a lawyer charging $200 per hour, broken into 15-minute increments the cost is $50 per 15-minute block. Six-minute increments, however, cost $20. Sending a single email costs you $50 in the first example and $20 in the second.
Of course, a lower hourly rate may not indicate a cheaper attorney. Experience is part of what determines that rate. A more experienced bankruptcy attorney may handle your case more quickly.
Retainers and Legal Costs
Attorneys, especially hourly attorneys, typically require a retainer to begin working your case. This retainer represents a portion of the total cost. In a flat rate fee, it is a percentage of the entire amount. For an hourly attorney, the retainer represents a certain number of hours of the attorney's time. Time spent working your case is deducted from this retainer.
Payment after the retainer is depleted depends on whether you file Chapter 7 or Chapter 13. Chapter 7 attorneys typically require full payment prior to filing your case. As stated above, Chapter 13 bankruptcy allows repayment as part of your reorganization. Negotiate with your attorney to determine the amount to be paid up front.
Legal costs are those costs incurred while working your case; they do not include the attorney's fee, such as administrative costs and court fees. Ask the attorney for an estimate of legal costs you can expect to pay.
Schedule a Free Consultation
If you are considering filing for bankruptcy, schedule a free consultation with an experienced bankruptcy attorney. Your time during this consultation is limited, so come prepared with a list of questions as well as paper and pen to record the attorney's answers. You'll want to refer to your notes later when making your decision. Finally, research the attorney ahead of time; a quick review of your area's State Bar Association website reveals such details as specialties, disciplines, and educational background.