Kentucky Bankruptcy Law

Counsel with Care

What you should know about fee shopping for a bankruptcy attorney

All bankruptcy attorneys get a fair number of inquiries that start with “How much do you charge for a Chapter 7?” This happens in this area of law more than in other areas because the folks seeking help are already strapped for cash. They are struggling to get through the month and so a couple hundred dollars can make a huge difference. This is understandable, but there is more to consider. Even Chapter 7 bankruptcies can be fairly involved: one or more meetings of creditors, reaffirmation agreements, possible challenges of dischargeability, challenges of “abuse” for being in a 7 rather than a Chapter 13, motions to lift stays, challenges to use of exemptions, audits, and amendments to the petition or schedules are some of the possible issues that could arise.

Because not every Chapter 7 is alike, most bankruptcy attorneys carve out exceptions to what the flat fee quoted at the beginning of the case will cover. Some attorneys just prepare the petition and file it and state in the fee agreement or petition that they will not do anything else. Some attorneys will also cover rearffirmation agreements. Some attorneys include audits (which happens to roughly 1 out of every 250 cases) for the same flat fee. So, you could call one attorney who quotes $750.00 attorney fees and another attorney that quotes $1,400.00. At first blush, it seems like the $750.00 is the best deal, but what if that attorney only prepares the petition for you and perhaps goes to one meeting of creditors while the other one covers everything audits and appeals? What if you end up getting your case dismissed or a significant amount of debt undischarged with the $750.00 attorney? Now it looks like the other attorney, the $1,400.00 attorney, was the better deal.

Another quality of representation that one cannot determine by just calling for a quote on attorney fees is how you and your bankruptcy are handled within the law firm. Some law firms are set up to handle a very high volume of cases and quote lower fees. With these, you typically will only meet the attorney once (maybe twice) and all the rest of your conversation is with a secretary or paralegal. While this may work fine for many cases, what if your situation has just one little oddity that requires the greater expertise and attention of the lawyer? What if you end up losing an asset because an exemption was applied automatically rather than with consideration for the big picture?

Other firms treat your bankruptcy the same way they would other legal matters in that they pay special attention to the facts and issues unique to your situation. They strategize the best approach and then direct their secretary or paralegal in making sure all the supporting documentation is pulled together rather than letting the secretary or paralegal drive the case. To do this, they cannot take as many bankruptcies and so they charge more per case.

Clearly I have a bias; I prefer to spend time and make sure each bankruptcy is approached with the best outcome in mind for that individual debtor. I do recognize the economic pressures of the moment to find the cheapest, fastest relief. When people call and ask what I charge, I tell them right away they will find less expensive bankruptcy attorneys. Although it seems hard, I do try to remind debtors that a couple hundred dollars difference in attorney fees is mere pennies to the discharge of thousands of dollars in debt. I then help them figure out a way to come up with those couple hundred dollars. While getting served with a lawsuit can send anyone into panic mode, usually there is still time to come up with a workable strategy.

Whichever approach your choose, the least expensive bare bones assistance or a little more expensive and more expansive assistance, just be aware of exactly what you are getting for the fee you pay. Insist on the items covered by the fee and those excluded from the fee being spelled out in writing. Make yourself aware of what will be charged should you end up needing help with an exluded item. For example, how much will they charge you if the trustee files a motion to dismiss.

July 5, 2010 Posted by | attorney fees, Bankruptcy, Pre-filing planning | , , , , , , , , , | Leave a comment

Lessons in family law: appeals, bankruptcy & garnishment

There are a number of lessons to be learned from the recently released Kentucky Court of Appeals case Mickler v. Mickler, 2006-CA-001313-MR (Jan. 25, 2008)(to be published). A few of the lessons come from the procedure and facts of the underlying case rather than the appeal itself.

In Mickler, some affluent folks, Andrew and Terry got divorced. Andrew was an otolaryngologist who made in excess of $200,000.00 per year. The first lesson is that the harder it is to pronounce what you do, the more you will likely be paid. At the time of the divorce, Terry was 53 years old and had not worked outside the home for the duration of the twenty-two year marriage. The trial court awarded Terry $111,809.03 for her share in Andrew’s medical practice, half the proceeds from the sale of the marital residence and another piece of property, her car, and over $400,000.00 in retirement funds. In addition, Terry was awarded $7,000.00 in monthly maintenance for 12 years (that’s $1,008,000.00 for my fellow coupon clippers).

The second lesson is that if you are married to a highly paid professional, it pays to not pursue your own career. Actually, this is not a hard and fast rule because the majority of Kentucky appellate cases where long-term maintenance is awarded involves some form of disability on the part of the receiving spouse. I would consider this situation a gray area regarding maintenance for two reasons. First, being 53 is not really a disability although it can be more difficult to obtain gainful employment at that age without relevant experience. Second, Terry received considerable assets in the divorce. To receive maintenance, you must show that you cannot meet your reasonable living expenses and your standard of living only comes into play after crossing that initial hurdle.

Arguably, Terry could meet those reasonable living expenses (and even some unreasonable ones) with the assets distributed to her. Here though, the trial court seemed to define Terry’s reasonable living expenses by her prior lifestyle which is a bit of circular logic. If the legislature had meant for all divorced folks to maintain their prior standard of living, then they would have made the initial hurdle “lacks sufficient property . . . to provide for his standard of living established during the marriage” instead of “reasonable needs“. KRS 403.200.

I suspect these apparent errors by the trial court encouraged the filing of the appeal. Here is where the third lesson came into play. Because Andrew (actually his attorney) failed to file a supersedeas bond to stay the execution of the trial court’s orders pending the appeal. The lesson is that if you think the court messed up, be sure to do all you can to put those orders on hold while you appeal. Because Andrew did not do this, but also did not pay up, Terry filed a motion to hold him in contempt. Andrew responded with filing bankruptcy to get the stay on collection proceedings offered there.

Here is where Andrew made yet another mistake. He withdrew $64,000.00 from his checking account (I would never have another overdraft!) without disclosing this fact. That tends to be a no-no regardless of whether you are in Family or Bankruptcy court. Fortunately, Andrew was able to make a deal with Terry for temporarily reduced maintenance during that first appeal.

The Court of Appeals upheld the trial courts original order (well, I said it was a gray area – not clearly erroneous) and Terry came back with a second contempt motion. Andrew responded with yet another bankruptcy petition. This was the next mistake (sorry, I’ve lost track of how many) because this petition was quickly dismissed because (can you guess it?) the petition was filed for the purpose of avoiding compliance with the Family Court’s orders. The Supreme Court of Kentucky also turned down discretionary review of the divorce decree. Things just were not going well for Andy at this point.

Sensing that Andrew was on the ropes, Terry filed garnishments on various insurance carriers thought to owe funds to Andrew’s medical practice. That is where this particular appeal finally comes into play: click here for the rest of the story!

January 27, 2008 Posted by | Bankruptcy, Civil Procedure, Family Law | , , , , | 1 Comment