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What Should Bankruptcy Cost?

By Cathy Moran

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pay for bankruptcy

Pick a cheap bankruptcy lawyer and it could really cost you.

We’re trained as consumers to find the lowest price for stuff we buy. But picking a lawyer is not the place for economy.

But how can you know what a bankruptcy should cost when you’ve never hired a lawyer before and you don’t want to ask around?

Lots of factors drive the price of bankruptcy: location, complexity, competition.

But one thing is universal.

The cheapest bankruptcy lawyer in town either doesn’t have experience or doesn’t plan to do the work himself, pawning your case off on unlicensed staff.

And the  extra cost of getting another lawyer to repair a case gone bad is only half the problem. Not all the problems created by the bargain-basement lawyer can be fixed.

Even when the case can be saved,  the clients will end up paying twice: one to the cheapo lawyer, and again to competent counsel to clean it up.

Undoubtedly, they’ll pay more than if they’d paid a good lawyer to do it right the first time.

Bankruptcy no place for mistakes

Right now, in my office we have three conversions from Chapter 11 to Chapter 7 involving significant real estate assets. These are cases where the first lawyer couldn’t see the obvious: the Chapter 11 case was doomed from the start.

We have cases where big ticket assets were omitted.  We have cases where the initial attorney just didn’t persist with the debtor to get the schedules right, and ones where counsel didn’t really analyze the choice of chapter.

Almost without exception, the debtors chose counsel based on price.  They went with the lower price for their bankruptcy case, and they bought a rat’s nest.

Cost conscious only at the end

Why is it that notions of economy only surface after a person has wracked up tens of thousands of dollars in debt?

Many of the debtors gave more thought to credit card expenditures or their credit score than they gave to picking a bankruptcy lawyer.

The influx of lawyers to this field and the prevalence of lawyer advertising suggest bankruptcy law is a commodity. Not so.

Yet lawyers with no track record to tout or past clients to spread the word  compete on price.  If you can buy a $15 toaster, why pay $30? goes the thinking.

Bankruptcy forms are misleading

The existence of non lawyer petition preparers and do-it-yourself books reinforce the idea that bankruptcy is more like playing Go Fish than contract bridge.

Bankruptcy no place for do-it-yourself

Then, there are the official forms. The fact that there are forms to fill out suggests that filing bankruptcy is all about the paper. It’s really about the disclosure the paper requires. And what the system does with the information disclosed.

What the bankruptcy papers require

And disclosure is what the forms are all about, and the system wants disclosure because there may be consequences to the stuff disclosed.

Price isn’t everything

Quality of counsel is not reliably correlated with price:  I’ve seen some utter newbie lawyers charging more than highly skilled veterans for an inferior product.  But capable counsel is seldom the cheapest.

So, my charge to those needing bankruptcy relief is to consider that hiring the cheap bankruptcy lawyer is a poor bargain.

Figure how much should you pay for bankruptcy

Another time, I’ll talk about how to assess a lawyer’s suitability for your case.

More

Questions to ask a bankruptcy lawyer before you file

Why you don’t want a bankruptcy lawyer to fight for you

DYI bankruptcy did him in

Image courtesy of purpleslog.

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Filed Under: Consumer Rights, You & your lawyer Tagged With: bankruptcy lawyer

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

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Bankruptcy Basics

About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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