How to Avoid Driving Up the Cost of Your Bankruptcy

People file a chapter 13 bankruptcy to restructure their debt and get their financial lives back on track. Naturally, one of the first steps towards doing that, even before they file the bankruptcy, is getting a good price on the attorneys fees. The question "Does this include everything?" is a common one in my office.

The answer is that I will quote a fee for doing the work that is routinely necessary to get a case from the preparation of the paperwork (petition and plan of repayment) to the confirmation of the plan by the court. However, certain things can happen that will result in what are called "supplemental fees." Most of them come about from the client doing or not doing something detrimental to his case.

The following list of "don'ts" represents common ways in which my clients drive up their costs. Avoiding them, therefore, is very important to insuring that your bankruptcy does not cost more than it should.

1. Don't Fall Behind on Plan or Mortgage/Car Payments. If you fall behind on payments to the trustee on your plan, he or she will move to dismiss your case. If you fall behind on regular mortgage or car payments outside the plan, the creditor will move for relief from the bankruptcy stay in order to foreclose on the home or repossess the car. Responding to such motions triggers additional fees to your attorney to fix the problem, and you may also pay fees and costs to the creditor for having to bring the motion! Although these fees are often paid through your plan, it will certainly increase the amount of your payment.
2. Don't Leave Out a Creditor. In either a chapter 7 or a chapter 13, it is important to list all of your creditors; in fact, the bankruptcy code requires you to do so. However, it is especially important in a chapter 13 because there is a higher likelihood that the omitted debt will not be discharged when your plan is completed. Adding creditors to a bankruptcy after it is filed entails a filing fee (in NJ it is $26) and usually a supplemental fee to the attorney to file the appropriate paperwork and notice those new creditors.
3. Don't Fail to Take Your Financial Management/Debtor Education Class. In order to get a discharge, you have to complete this second course and have your attorney file the proper paperwork with the court. If you do not do this, your case will be closed without a discharge being issued! To fix this, you must take the class, move to reopen your case (which, in NJ, carries a filing fee of $260), and pay your attorney a supplemental fee (which is due immediately, as there is no longer a plan in which to put the additional costs), then file the paperwork.
4. Don't Fail to Provide Your Attorney with What He Needs to Confirm Your Plan. Every time I am in court for a hearing on the confirmation of a client's plan of repayment, I hear dozens of cases get adjourned to a new date because the trustee needs certain information that the debtor did not provide. Repeated appearance by your attorney can also drive up your fees.
5. Don't Fail to Appear at the Meeting with the Trustee. The bankruptcy code requires you to meet with the trustee and give testimony under oath. This MUST be done before your plan can even be considered for confirmation. If your attorney shows up and you don't, guess what? He or she will probably charge you for the extra appearance.

This is far from an exhaustive list or a "top five," but they are common ways in which people end up spending far more than they have to on their bankruptcy. Since it is sometimes necessary for an attorney to make a motion or deal with some other out of the ordinary task on your case for which you will be charged extra, why make it worse by not holding up your end?

The bottom line: cooperate with your attorney, do everything he or she says, and avoid the mistakes above, and you will minimize the chances that your bankruptcy will cost you any more than you were originally quoted.

Looking for more information about bankruptcy? Get the answers to the most frequently asked questions by downloading my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey. It will give you the answers you need all in one place. Then call me at 888-857-8418 or contact me through this site for an appointment for a free consultation to discuss your case.