What You Need To Know About Paying Attorney's Fees Through The Chapter 13 Payment Plan.

There are some attorneys who have used Chapter 13 bankruptcy payment plans as ways to essentially finance bankruptcy attorney's fees

. If a debtor didn't have enough money to pay for a Chapter 7 bankruptcy up front, they would file a Chapter 13 which has attorney's fees included in the monthly payment plan.

The case in Massachusetts banned a practice which involved attorneys who filed Chapter 13 bankruptcies for the purpose of paying attorney's fees through the chapter 13 payment plan.

Why did this situation arise in the first place? Because their clients couldn't afford the upfront fees of a Chapter 7, the attorneys recommended that they file a Chapter 13 bankruptcy, which they could use to pay attorney's fees over a long period of time. The Judge ruled that filing a Chapter 13 for the sole purpose of paying attorneys fees was not in "good faith" if the client was better suited for a Chapter 7.

Wait, let's back track. What makes a Chapter 7 different than a Chapter 13? A Chapter 7 gets rid of "unsecured" debt allowing debtors to eliminate credit card debt, medical bills, payday loans and other unsecured debts. Sometimes there are exemptions, but for the most part, Chapter 7 bankruptcies are intended for people without many assets, but have a lot of debt.

But, in distinction, a Chapter 13 can give you protection from foreclosure or other possible actions from your creditors. The good thing about a Chapter 13 bankruptcy is that for people with a lot of assets, such as a home, are able to keep them.

Now, both Chapter 7 and Chapter 13 provide immediate protection from creditors. This means that harassing creditor calls, wage garnishments, and threats to your property can finally end. However, as you can see, Chapter 7 and Chapter 13 are meant to help two entirely different kinds of debtors. Advising someone to file a chapter of bankruptcy that isn't right for their situation could leave them without a real fresh start. The debtors in this situation probably won't be able to get through a Chapter 13--because their income and debt were more appropriate for a Chapter 7. The judges in this case were actually protecting the debtors from losing their fresh start.

It's very important to hire the best bankruptcy attorney you can and one that will give the best advice for your situation, regardless. What is a good way to look for a bankruptcy attorney? Look for someone willing to provide you with all the information you need to know beforehand--so you can also make an informed decision about your bankruptcy. What does that mean? Nothing other than that a bankruptcy lawyer is experienced and proves her experience in multiple publications online and off.

Each individual bankruptcy case needs to be evaluated to decide if a Chapter 13 or chapter 7 is the best choice, and a good bankruptcy lawyer will tell you why. The best bankruptcy attorneys will make sure to recommend whichever one is best for you--not for their own pocketbook.

This is what you should understand about an attorney fee only Chapter 13 bankruptcy: they are probably not in your best interest if you are better off filing a Chapter 7.

by: Jim Brown

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