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How Do Bankruptcy Attorneys Get Paid?

It may seem like common sense but, in general, clients hiring attorneys should enter into a written fee agreement before employing that attorney. Bankruptcy debtor clients are no exception to this prudent suggestion. In fact, a written fee agreement is even more of a priority in a situation where maximizing few precious funds is paramount. The agreement should detail how much the attorney is going to charge for his or her services, costs and fees for filing bankruptcy with the court, and costs for other administrative expenses such as copies, faxes, and telephone charges.

Fixed Fee Agreements

In bankruptcy, it is common to have a fixed fee agreement with regard to filing fees. This means that the attorney agrees to accept a fixed fee for his services in assisting the bankruptcy debtor with filing and case administration. Fixed fees for bankruptcy counsel range significantly and vary by jurisdiction, type of case, timing of case, difficulty of case and issues, and experience of the attorney, as well as a host of other factors. Notwithstanding such variables, it is generally safe to assume that bankruptcy counsel will charge a fixed fee of at least $1,000 to $2,500 in most instances. Of course, these figures are only approximate floors; the actual fixed fee charged may be higher, or even much higher in some circumstances.

Hourly or Billable Hour Arrangements

An alternative arrangement for counsel fees is the hourly fee or billable hour method. If a client will require a lot of the attorney's time over the lifespan of a bankruptcy case, this fee arrangement is favorable to the attorney and quite costly to the debtor client. Hourly fees are often charged for creditor and trustee representation, while debtor representation is often fixed fee.

Payment Plans for Fees

Because of the nature of bankruptcy and the fact that most debtors do not have a surplus of cash (or they would not be filing bankruptcy), bankruptcy attorneys are usually empathetic and willing to work on payment plans for fees. Counsel may take installments on periodic dates or set intervals in the bankruptcy case. Additionally, it is possible for counsel to have fees paid for through the bankruptcy plan in a Chapter 13 case, rolled into debtor's monthly plan payment. Finally, bankruptcy counsel may even be able to suggest creative and constructive ways for clients to raise the funds required to pay legal fees. Counsel can suggest areas in a budget to tweak to raise funds.

Supplemental Fees

If supplemental work is performed by counsel beyond the standard services for a basic legal fee, then debtor's counsel is able to file a supplemental fee application with the court to seek a further allowance of pay for legal services rendered to debtor. Fee applications are closely and thoroughly reviewed by the U.S. Trustee's office, trustee assigned to the case, and bankruptcy court.

Just because one party in an agreement is an attorney does not mean traditional paperwork (like fee arrangements) are not necessary. Far from it - in many cases, the involvement of an attorney in a situation means extra attention should be paid to the fine details of the fee agreement. After all, what's worse than declaring bankruptcy? Having your bankruptcy attorney after you for unpaid fees...