How do bankruptcy attorneys get paid?
Short answer for chapter 7: bankruptcy attorneys get paid in full by the debtor before the case is filed.
Short answer for chapter 13: bankruptcy attorneys get paid through the chapter 13 plan.
This is a common question I get and it is understandable why people would be confused by this. This question comes to me somewhat like this: "How can someone who needs to file for bankruptcy afford to pay an attorney? Attorneys are expensive!"
In a chapter 7 bankruptcy there are two fees you must pay: the attorney's fees and the Court filing fee. Many firms, including my own, require that the attorney's fees be paid in full before we file the bankruptcy petition.
People contemplating filing for bankruptcy are usually paying bills to unsecured creditors or the wages are being garnished. When you file a bankruptcy all those payments stop. I advise people to stop paying their credit card bills or medical bills and instead pay me.
In a chapter 13 there are also two fees that you must pay: the attorney's fees and the Court filing fee. Each case is a little bit different but generally chapter 13 attorneys require between $400 and $800 upfront. This will cover the Court filing fee and will compensate the attorney for some of his time. The rest of the attorney's fees are paid through the chapter 13 plan.
Posted by Sean Wood