Bankruptcy is an investment for our clients. When finances are tight, anything is a significant investment. But the investment always pays off. The amount of money the client pays is nearly always inconsequential when compared to the tens of thousands of dollars of debt that is discharged. Furthermore, bankruptcy gives Minnesota families a fresh financial start. That’s something which is almost literally priceless.
Bankruptcy’s Filing Fees
As the filing volume has steadily declined since 2005, the bankruptcy court filing fees have steadily increased. With fewer filers, the people who do file bankruptcy cases must pay more to keep the bureaucracy solvent. So, fees constantly change as well. As of December 2016, the Minnesota filing fees are:
- $335 for a Chapter 7, and
- $310 for a Chapter 13.
Ancillary filing fees apply as well. The clerks charge money for transfers to different jurisdictions, conversions to different chapters, re-opening closed cases, and the list goes on.
In some cases, the bankruptcy judge waives filing fees or permits installment payments in Chapter 7 cases. To qualify, the debtor’s income cannot be more than 150 percent above the local poverty line. Furthermore, the debtor must normally complete a brief financial information form. That form must contain a declaration that the debtor cannot afford the fee at all or can only pay in installments. The last installment payment is usually due within 120 days.
There is no installment filing fee plan, or filing fee waiver, for Chapter 13. These debtors must demonstrate that they have enough income to make the monthly debt consolidation payment. Paying all filing fees upfront is part of this qualification process.
Bankruptcy’s Attorney Fees
Federal debt relief is quite unlike any other area of law, like family law, criminal defense, or civil litigation. So, the question of a reasonable fee is a thorny one.
The “zero-down” bankruptcy was once a popular fee arrangement with both attorneys and clients. It’s still used in some cases. But there are concerns.
First, the zero is not really a zero. In most cases, the debtor must pay the filing fees. Second, “zero down” sounds like a sales gimmick. At Kain & Scott, we do not deal in gimmicks and promotions. We deal in fresh starts for the Minneapolis families which need them most.
There are ethical concerns as well. The “zero down” bankruptcy is in a gray area. Although there are some exceptions, attorneys usually cannot accept fees contingent (dependent) on the outcome. Opinions go back and forth as to whether a zero-down fee qualifies as such.
Chapter 13 Bankruptcy also involves the controversial no-look fee. All bankruptcies — even bare bones emergency filings — must contain declarations as to the amount of fees the client has paid and/or will pay. If the fee is below a certain amount, the trustee (person who oversees the bankruptcy for the judge) does not question the figure. Many lawyers simply charge the maximum no-look fee. The amount varies significantly by jurisdiction and is always subject to change without notice.
But no-look fees have almost no consideration for the complexities and nuances in each case. So, at Kain & Scott, we typically charge a fee which accurately reflects the realities of the case and client.
How the Investment Pays Off
Almost all of our clients owe more than $20,000 in unsecured debt. The credit cards, medical bills, and unsecured loans add up very quickly. Both Chapter 7 and Chapter 13 normally discharge most or all of this debt. If the total fee is $1,000, that’s a possible 20 percent return on your investment. Take that, Bitcoin.
There’s more. Chapter 13 gives distressed debtors up to five years to catch up on past-due secured debts, such as home mortgage payments. The repayment plan is completely income based. It has nothing to do with the amount the moneylender demands upfront. During the entire protected repayment period, the moneylender cannot take any adverse action without special permission. If the debtor is current on payments, the judge hardly ever grants this permission.
There’s still more. Bankruptcy gives debtors leverage in negotiations with moneylenders. In some cases, debtors can discharge second liens, such as HELOCs, from the mortgage payments. Other people take advantage of the redemption options for secured debt. If the debtor is underwater on the car or other asset, it’s usually possible to pay the current fair market value and own the asset outright. Finally, if there is a legitimate dispute as to the amount owed, the moneylender must negotiate the matter in good faith.
We’re not finished yet. At Kain & Scott, we give you the tools for long-term financial success. That includes things like a free credit repair program. Clients who take full advantage of this initiative, and others like it, often do not remember that they filed bankruptcy after a few years pass.
Bankruptcy is an investment that pays significant dividends. For a free consultation with an experienced bankruptcy attorney in Minneapolis, contact Kain & Scott. After-hours appointments are available.