How do you pay your bankruptcy lawyer for a Chapter 7 case?  If you had a ton of money, you probably wouldn’t need to file for bankruptcy.

Most bankruptcy lawyers offer convenient payment plans to help you get your case filed.  Some lawyers even let you pay your Chapter 7 legal fees after the case has been filed.

Here’s a tip - if your lawyer files your Chapter 7 bankruptcy case before you have paid in full, any attempt to force you to pay after the filing date is illegal and in violation of the automatic stay in bankruptcy.

That’s right - your lawyer may be violating the bankruptcy laws by demanding payment of legal fees after the case has been filed.

So the alternative is to pay your Chapter 7 legal fees in installments.  While you are paying those fees, your lawyer should be working on your case to get it ready for filing.  This should include:

• helping you put together all of the documents needed for your bankruptcy filing
• drafting the bankruptcy papers so they can be filed as soon as you have paid your legal fees in full
• contacting all debt collectors to let them know they are no longer permitted to call or write to you (if they do keep calling or writing after being told that you have a lawyer, they are in violation of the Fair Debt Collection Practices Act)
• filing an Answer in any debt collection lawsuit so that a default judgment is not entered against you
• getting your bank accounts unfrozen if a creditor or debt collector has restrained any money that is exempt under state law

When discussing fees with an attorney, it is important to remember that you often get what you pay for.  An attorney with lower fees may not be able to give your case the individual attention it requires.  An attorney with the proper experience should be able to provide an accurate quote before proceeding with your case.

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When people file for bankruptcy, they have their sights set on obtaining the discharge that will allow them to get out from under the crushing debt that sent them to bankruptcy court in the first place.  Once that weight has been lifted, they look forward to rebuilding their lives and not struggling to financially stay afloat.  However, when your old creditors violate the discharge you must reopen your bankruptcy case.

There is a growing trend these days for debt buyers to buy old debts from the original lender for pennies on the dollar.  The new owners of the debt then make renewed attempts to collect.  Sometimes, these resurfacing debts have been discharged in bankruptcy.

When a person is granted a discharge, he or she is often confused and upset that this old debt has popped up again.  When a discharge is granted, the recipient is no longer responsible for any debt covered by the discharge.  That means that by attempting to collect, the collection agency is committing a crime.

If the collectors keep hounding you, then you need to reopen the bankruptcy case.  Reopening the case allows the courts to enforce the discharge and also lets you seek damages against the creditor or debt collector.

There is no filing fee for a debtor to reopen a bankruptcy case to pursue a creditor or debt collector for violating the discharge injunction.

Reopening a bankruptcy case is the best way to let debt collectors know you won’t be bullied around.

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You file for Chapter 7 bankruptcy and forget to list one of your debts.  Is it still discharged, or do you have to pay it?  After all, a discharge in bankruptcy is a powerful remedy.

You are required to list every outstanding debt you have, along with current contact information for every creditor.  Finding this information can require some searching and it’s not uncommon to forget some of the ones that haven’t been enthusiastically pursuing you.  As trying as the process can be, it is important to get complete and accurate information to the courts.

When you file for bankruptcy, you’re required to list all of your outstanding debts.  Some people, for fear of completely ruining their credit, will leave off a few of the smaller debts.  However, bankruptcy papers are signed under oath and carry a penalty for perjury.  So, intentionally leaving a few items off the list is not only a bad idea, it’s illegal.

However, not all omissions are intentional.  As is so often the case, there can be old debt floating around out there that was simply forgotten.  If the creditor was not listed on the bankruptcy paperwork, the courts would have no way of notifying them of the proceedings.  If this is the case, you must notify the creditor of the bankruptcy and then provide proof to the court that you have taken this step. 

In a no-asset Chapter 7 bankruptcy case in New York, an unlisted debt is considered to be discharged so long as the omission was unintentional.  If you realize that you left off a debt then you could immediately contact your bankruptcy attorney, who can review your case and take the proper action.

In some situations, it may be wisest to reopen your case to include the forgotten creditor.  This could end up costing you more in court costs and attorney’s fees, but it could save you much more in the long run.  

Forgetting to add a few debts to the bankruptcy documents can happen from time to time.  It is important to add all the ones you know of, regardless of how much you owe.  If you remember one after the bankruptcy has been filed, take the necessary steps to alert the creditor to your present situation and then notify your attorney. 

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You are eligible for a Chapter 7 bankruptcy discharge only every eight years.  In addition, the U.S. Supreme Court in Lamie v. U.S. held that any Chapter 7 legal fees for pre-bankruptcy services must be collected by the time the bankruptcy is filed.  That means if you haven’t paid your Chapter 7 bankruptcy lawyer in full by the time the case is filed, you cannot be forced to do so afterwards.

Under Chapter 13 bankruptcy, however, you CAN pay your lawyer after the case is filed.

So what happens if you can’t come up with the Chapter 7 legal fees in time to stave off a wage garnishee or bank account freeze?

For many consumers around the country, the answer has been a Chapter 13 bankruptcy.  Under Chapter 13 bankruptcy you are required to file a Plan designed to pay certain creditors, but for people who are living on the edge of financial ruin and making below median income, that Plan may require $0 in payments.

In such case, people who need to file NOW or have been through Chapter 7 bankruptcy within the past eight years would file what is termed a “fee only Chapter 13 Plan.”  In other words, file a Chapter 13 Plan that provides for payment of your attorney’s legal fees but nothing else.

Not anymore in Missouri, holds the case of In re Montry, Case No. 08-30413 (W.D.Mo. 2008).

A Missouri bankruptcy judge has now sent up a flare of sorts, indicating that this would not be permitted in his court because such a Plan is not in “good faith.”  And though this court has no impact on New York, it’s useful to talk about it because it effectively bars consumers from seeking the relief they need - when they need it.

Section 1325(a) of the Bankruptcy Code states that “the court shall confirm a [Chapter 13] plan if . . . (3) the plan has been proposed in good faith and not by any means forbidden by law.”  The Bankruptcy Code does not define “good faith,” and courts have used as standard for good faith the “totality of the facts and circumstances.”

So what does that mean?  According to a 1982 case called In re Estus, the Eighth Circuit Court of Appeals suggested eleven factors courts may consider in their determination of whether a Chapter 13 case has been filed in good faith.   In addition, the New York case of In re Paley, 390 B.R. 53 (Bankr. N.D.N.Y. 2008) held that “[a] plan whose duration is tied only to payment of attorney’s fees simply is an abuse of the provisions, purpose, and spirit of the Bankruptcy Code.”

The Missouri court tries to use the increased legal fees in a Chapter 13 as opposed to those in a Chapter 7 as a reason why their decision is consumer friendly.  But in reality, this court - as well as the Paley court right here in New York - have slammed shut the door to consumers who need bankruptcy help but either cannot afford to pay the fees for a Chapter 7 bankruptcy or do not qualify for a Chapter 7 discharge.

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Can’t get discovery voluntarily from your opposition?  According to a recent bankruptcy case in the U.S. Bankruptcy Court for the Southern District of New York, it’s wise to keep in mind the provisions of Rule 37 before making a motion to compel discovery.

Milagros Reyes file a Chapter 7 bankruptcy case, and was sued by Citibank (South Dakota), N.A. by its counsel, Solomon and Solomon, P.C. Solomon served its first discovery request on Mrs. Reyes’ lawyer. When no responses to those demands were received, they sent a follow-up letter.  Without a response from their letter, Solomon made a motion to compel answers to those interrogatories on November 16, 2006.

Solomon failed to include a certification in its motion to compel discovery that it had in good faith conferred or attempted to confer with Mrs. Reyes’ counsel concerning the disputed interrogatories, as is required by both Fed.R.Civ.P. 37 and the Local Rules of the U.S. Bankruptcy Court for the Southern District of New York.  Judge Gerber noted that in the absence of unusual circumstances, this failure would demand denial of the motion to compel and, in nearly all cases, an award of the opponent’s reasonable expenses.

Mrs. Reyes’ lawyer finally served the relevant interrogatory answers on Solomon on December 7, 2006, though they were seemingly answered on November 10, 2006, before Solomon’s motion to compel was brought.  Apparently, Solomon received the answers on December 11, 2006, only two days before the motion was scheduled to be heard.

All in all, it sounded to the court (in reading between the lines) as if the debtor’s lawyer rushed out the discovery responses in an effort to cover his or her tracks.  Though the court found that Solomon acted in “blatant noncompliance with the rule, the resulting damages were also caused, in part, by the delay in service of the interrogatories on Solomon.”

The Court declined to award sanctions against Solomon, however.  Though the motion could have been avoided by complying with the “Meet and Confer” requirement of Rule 37, Mrs. Reyes’ counsel’s failure to promptly serve the answers that had been previously executed exacerbated the situation.

In the future, the court cautioned, “counsel are to strictly adhere to the certification requirement in Rule 37 and are to confer in good faith to consensually resolve all discovery disputes before bringing such issues before the Court. Counsel should be on notice that in the absence of unusual circumstances like those present here, any future violations of the “Meet and Confer” requirement causing unnecessary work to be performed by opposing counsel or the Court will result in sanctions.”

The case is In re Reyes, Slip Copy, 2008 WL 724169 (Bankr.S.D.N.Y. 2008).

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