How are Attorney’s Fees Paid in a Chapter 7 Case and When?

With regard to Chapter 7 bankruptcy cases specifically, attorney fees owed to the Debtor’s counsel for services prior to filing the case must be paid before filing your Chapter 7 case. The reason for this is simple: once the Chapter 7 action is filed, any outstanding debts may be subject to discharge. Accordingly, bankruptcy attorneys, as a matter of practice, will either collect the anticipated before they file their client’s cases, or they will collect a retainer, pay themselves the amount owed on the filing date, and use the remainder to cover post filing fees.  Fees incurred after the filing date are not dischargeable in the Chapter 7 case.

As for the amount that may be charged, that will vary depending upon several factors:

• the size of the bankruptcy estate

• the expected complexity of the case

• the number of legal issues which are likely to be involved in the case

While the bankruptcy attorney can and does set the legal fees he or she wishes to charge on a particular bankruptcy case, the amount of the fees can be scrutinized by the bankruptcy court subsequently. Bankruptcy courts do give attorneys latitude as to the amount which they charge. However, they can withhold approval of the amount if it is viewed as too cumbersome for the debtor. Accordingly, the bankruptcy attorney may have to provide an explanation to justify their fee. Often this can involve providing the bankruptcy judge with a statement or affidavit which itemizes what specific services are or have been performed and what is the rate charged for such services, whether it is services provided directly by the bankruptcy attorney or one of the firm’s support staff. Such an itemization may also include costs incurred by the bankruptcy counsel or firm.    

A person considering filing a Chapter 7 bankruptcy case should carefully ask any potential legal counsel about the fees he or she charges before deciding who to hire to handle the case. Chapter 7 bankruptcy filers should not be shy about asking such questions. It is important they understand how the fee structure is determined before any decision is made.

In Albuquerque, Giddens & Gatton Law, P.C. has bankruptcy attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases in New Mexico. The firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, P.C. at (505) 633-6298 to set up an appointment with one of its New Mexico bankruptcy lawyers or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.