It’s not a new issue:  People filing bankruptcy are concerned about how much legal representation will cost them. 

This is completely understandable given the financial situation they are in.

As a result, attorneys advertising  “low cost” bankruptcy filings are attracting unwary clients like mosquitoes to stagnant water.

Using a Cheap Bankruptcy Attorney Can Be Dangerous

There is a growing disparity in attorney’s fees charged by attorneys to represent individuals in a bankruptcy case.

For example, for  representation in a Chapter 7 case attorney’s fees in the Greater Los Angeles Area can range from around $750 to over $3,000, plus the required court filing fees.

Why the big difference?

To be quite honest, primarily it is quality,  and having your case botched by an inattentive or inexperienced bankruptcy attorney can be devastating and end up being far more expensive.

I am not saying that all lower-priced attorneys are incompetent and I’m not saying all high-priced attorneys are great.

I’m merely saying that while the cost of hiring an attorney is certainly a relevant and important factor, one’s chief criteria for selecting an attorney should NOT be the price because there are many far more important factors, as explained below.

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What Do you Get For Your Money?

You should find out what exactly you’re getting for the fees.

Is the attorney going to hit you with a bunch of additional fees as the process goes along, claiming that it wasn’t included in the originally quoted fee?

This is a very common result of attorneys who do not get sufficient information up front and, consequently (or because they simply lack the requisite knowledge and experience), do not anticipate the potential problems that may arise in the case.

It’s also common with attorneys who simply piecemeal their services and tack on additional fees for everything that happens.

Will the attorney be doing the actual work on your case, such as preparing the paperwork, including exemptions for your assets, or do they give it off to a paralegal or other petition preparer?  How long does it take the attorney to respond to questions you have?

Ask and compare.

You Get What You Pay For

There are many factors that can affect fees.  One is the complexity of the case.  But the main reason is simply that there are differences between attorneys and what “ingredients” they offer.

The old adage “you get what you pay for” applies to bankruptcy attorneys as well.

To use a food analogy:  You’re not going to get the same quality of food at Taco Bell as you are in an upscale restaurant.   You may enjoy the low price and (for some) the taste, but in the long term there can be very serious consequences.

What really amazes me in a lot of cases is that clients in bankruptcy are often seeking to get rid of $40,000, $80,000, and some well over $100,000 of debt,  yet they are giving serious debate over how they can save $100-$200 dollars on attorneys’ fees.

If you needed surgery done, would you want the lowest priced surgeon cutting into you?

I sure wouldn’t.

I wouldn’t necessarily want the highest priced one either, but I would be extremely suspicious of a low-priced doctor.   At best you’re going to be seeing someone who does a high volume practice who couldn’t possibly have the time to worry about your details.

At worst, you could be setting yourself up for disaster.

Choosing a bankruptcy lawyer is no different.   Bankruptcy law is very complex and it was made significantly more complex by changes to the laws in 2005.

There are literally hundreds of potential pitfalls and traps in every case and it requires an experienced bankruptcy attorney to anticipate, identify, and avoid those traps on your behalf.   Failure to properly do so can result in you having to spend thousands of dollars later to fix the mistake, if it is even possible then.

How Can Low Cost Bankruptcy Attorneys Afford to Charge So Little?

There’s only two ways bankruptcy attorneys can charge such low amounts and survive:  1.  Do a huge volume of cases; and/or 2.  Sacrifice the quality of representation.

Neither one of these is beneficial to you, the client.

Bankruptcy Attorney Due Diligence

When the bankruptcy laws changed in 2005, there were several provisions put into the new law governing attorney “due diligence” which essentially requires the attorney to undertake extensive additional steps to verify certain information of the client and take steps to ensure the accuracy of documents filed with the court, etc.

These are not tasks which can rightfully be delegated to non-attorneys to do.    I suspect that one way these low cost attorneys can afford to charge so little is that they are simply not doing everything they are required under the law to do.

They may not get “caught” or penalized that often, so they absorb the cost when it does happen, much in the same way that airlines find it more profitable to deal with a lawsuit when one plane crashes because proper maintenance had not been done, rather than to put in the time and expense to properly maintain the aircraft in the first place.

The other way they stay afloat is by doing a high volume business (low profit, high volume).

The problem with this is that there’s simply no way you’re going to get the same level of service or responsiveness from your attorney at a firm like that as you will from one who takes a more hands-on approach to his clients.

One thing you don’t want going through a process like bankruptcy is to meet with the attorney one time, then never see them again and find you’re unable to get any questions answered after your case is filed (especially if things start going wrong).    Again, almost every day I hear stories from unfortunate clients with this exact scenario regarding attorneys they hired.

See My View on Fees

“I Wish I’d Contacted You First…”

This is the most common statement I hear on a weekly basis from clients contacting me with bankruptcy problems.  Most of them have had their cases botched in various ways by cheaper, less experienced attorneys.  Frequently they can’t even get their current attorney to respond to their questions about their case.

Most of the time I can’t help these people because things have gotten too far down the road, they got incorrect advice to begin with, or they simply no longer have funds available to pay attorney’s fees.

I hate hearing these comments.

I really do.

I want to help people, but it’s not always possible at that point.

I’m  not advocating only hiring the most expensive attorney you can find.  Not at all.

But my suggestion is that you should focus on the attorney’s quality and experience rather than if they charge a bit more than the lowest priced competitors.

Find an attorney whose fees match your needs and expectations in terms of quality and service.

Some Examples of Poor Bankruptcy Representation 

Photo courtesy of  mat_the_w