bankruptcy isn't easy, but finding the money to pay for an attorney can be almost
"Lawyers don't like being put in a position
of being just another creditor," says Ray R. Graves, who served 20 years
as a federal bankruptcy judge in Michigan, and now works for BBK, Ltd., a business
consultancy headquartered in Southfield, Mich. "They're going to want to
be paid up front."
In other words, paying your bankruptcy
lawyer on the installment plan isn't a viable strategy. If you haven't paid an
attorney before filing for bankruptcy, he will just become another creditor, something
he's familiar with and won't want to contend with.
a partner with Iseman, Cunningham, Riester & Hyde of Poughkeepsie, N.Y., recalls
several instances when bankruptcy filings were delayed, most probably because
the lawyer hired to handle the case wanted to get paid first. "He was waiting
for 'Mr. Green,'" Mitchell says.
Unfortunately, you may
not have enough green in your wallet to hire an attorney. Fees vary, but lawyers
will charge anywhere from $400 to $1,200 for your run-of-the-mill filing and it
can cost even more if it's a complicated case. In high-priced urban areas, filing
for bankruptcy can cost on average from $1,000 to $3,000. And your lawyer will
want his payment before he'll represent you.
Now with the
new bankruptcy laws in effect, a cost-estimate
report with the Congressional Budget Office expects attorney costs to increase
by $150 to $500 per case. Under the new law, attorneys have increased liability
and paperwork and the CBO says that the "additional costs incurred by attorneys
would most likely be passed on to their clients."
sound like a Catch-22 -- you have no money so you're filing for bankruptcy, but
you need money so you can file for bankruptcy -- but there are a few things you
Hatch a bankruptcy nest egg. If you think you're a
candidate for a bankruptcy filing, start building up an attorney fund now, before
interviewing lawyers. Set aside whatever you can so you'll have the money when
you need it.
Seek an attorney that will take your case for
free. Pro Bono work is uncommon for bankruptcy cases, but it does occur. Check
with local legal services that specialize in aiding low-income individuals; they
may know of attorneys who will take your case for free or at reduced cost. Also
check with attorneys who serve on your bankruptcy court's advisory committee.
a lower fee. See if there are some filing tasks that require a time investment
and that you can handle. Your attorney may be willing to reduce (or eliminate)
his usual charges for these duties if you take care of them.
for court fees on the installment plan. There are provisions in the bankruptcy
code for this, says Mitchell. This won't free up a lot of cash, but it will help
you finance the hiring of an attorney.
Ask for help from family
and friends. They may be willing to co-sign a loan or loan you the money. Just
make sure they understand your circumstances and realize it may be some time before
you can pay them.
Tap your retirement funds. This really should
be a last-resort move because you could take a triple hit: a penalty for early
withdrawal, taxes due on untaxed contributions and earnings and a reduction (or
elimination) of your retirement nest egg.
C. McCune is a contributing editor based in Montana.