It’s an unfortunate fact that cons and frauds lie in wait to take advantage of people who are desperately seeking financial relief. If you are considering filing for bankruptcy, you owe it to yourself to be aware of scammers advertising a cheap bankruptcy. These bankruptcy scammers offering a cheap bankruptcy can leave you in a worse financial situation than you started, so beware. Protect yourself by steering clear of these cheap bankruptcy scams:
Zero-Down Bankruptcies
You’re behind on your mortgage, your credit cards are maxed out, and the bill collectors won’t stop calling. Your finances have been upside down for months on end, and no matter what you try, you can’t seem to dig yourself out. It feels like you’re out of options.
When you’re broke and down on your luck, the thought of paying fees to file for bankruptcy feels like adding insult to injury. Enter the “no money down” bankruptcy: a justifiably enticing option when there isn’t much money to spare.
How “No Money Down” Bankruptcy Works
The client signs a fee agreement and the attorney files a Chapter 13 bankruptcy case. Then, the attorney gets paid in installments later on.
When something sounds too good to be true, there’s often a shred of truth.
Some disreputable firms take advantage of your desperation by charging you more to file a zero-down bankruptcy. Although the bill isn’t due right away, a study in the Southern California Law Review revealed that debtors who opt for the “no money down” bankruptcy sometimes suffer later on: they end up paying as much as $2,000 more than they would have normally. What’s worse, these debtors are gambling with their financial futures. Their cases are dismissed 18 times more frequently than if they had filed Chapter 7.
Standard Bankruptcy Attorney Fees
The average fees charged by bankruptcy attorneys vary by state and region. What may be an acceptable fee in one state could be outrageously high in another. For example, the average fee in Idaho as of 2009 was $700 while the average fee that same year in Arizona was over $1,500. The fees charged in Illinois, Missouri and the rest of the Midwest are generally lower than the national average, but may be higher in Chicago and other big cities compared to rural areas.
Bankruptcy judges retain the right to examine fees charged by bankruptcy lawyers and order them to refund excessive amounts back to their clients. A few courts have enacted rules that set the maximum amount that can be charged, and if fees are over that amount, refund orders can be issued to attorneys without review. However, this system has not been enacted in all bankruptcy courts, and the courts stress that such systems are not meant to be used as fee limits.
Suspiciously Low Bankruptcy Fees
If the advertised rate for a bankruptcy case seems suspiciously low, then potential clients should follow up on their suspicions. Advertised fees in the range of $100 to $300 may be deceptive or misleading. The primary goal of placing ads for these fees is to get people to call and inquire. Once a person has taken the initial step by calling or appearing in person for a consultation, a fast-talking lawyer may be able to get him or her to become a client without any further discussion of fees. Even if the actual fees are disclosed, many people do not want to go through the hassle of visiting other lawyers and simply accept the rate even though it is much higher than advertised.
Bankruptcy lawyers charging extremely low fees may use one of several tactics to raise the fees or add fees to the base rate. These lawyers may state that the number of creditors is over the limit of what is allowed under the base rate or that the amount of the debt is too high for the base rate. Some may even charge more for a joint bankruptcy case than for an individual case.
Bankruptcy Mills
Some bankruptcy firms advertise aggressively on billboards and radio ads. You might even receive flyers in the mail from them if your home is in foreclosure. They seem to process hundreds of cases a month. When you need to file bankruptcy, you want a firm with that kind of experience, right? Not so fast.
Although hiring an experienced bankruptcy attorney should be your top priority, some disreputable shops attempt to maximize profits by cutting corners, limiting how much time their attorneys spend on any given case. These are called “bankruptcy mills,” and where you might see a reduced cost upfront, bankruptcy mills are notorious for nickel-and-diming clients every step of the way.
Should you go this route, don’t expect personalized attention. Secretaries and other administrative support staff, rather than trained lawyers, may handle most of your case. You may not even meet your lawyer until you’re in the courtroom.
To cut costs, bankruptcy mills will prepare your documents with haste. They may be riddled with typos and errors—errors that could delay your court proceedings or cause your case to be dismissed entirely. Clients of bankruptcy mills can count on a significantly lower chance of having their debts discharged.
If you hire an experienced bankruptcy attorney, on the other hand, you will benefit from personalized, one-on-one attention from start to finish. Your lawyer, experienced in the details of your case, will be able to prepare your documents with care, and you are much more likely to have your debts discharged in court.
Which situation would you rather find yourself in?
How to Avoid Cheap Bankruptcy Scams: Work Directly with an Attorney
The best way to protect yourself when filing for bankruptcy is to work with a legitimate and reputable St. Louis bankruptcy attorney. When you choose Benson Law Firms to represent you in your bankruptcy case, you’ll benefit from hands-on attention throughout the process.
Fee Amounts and Attorney Experience
The fees charged by bankruptcy attorneys are in no way linked to their experience or qualifications. Many people assume that attorneys who charge higher fees are better than those who charge lower fees, but this is not always true. Although clients should beware of attorneys who charge incredibly low fees, it is not uncommon to find reliable attorneys with proven case histories whose fees are lower than the regional average.
Attorney fees for bankruptcy cases may vary by each case. Complex cases involving large numbers of creditors and multiple assets may cost more than simple cases involving only a few creditors and no assets. The number of times that the attorney must appear in court before a judge, a trustee or a clerk may also affect how much a client is charged. Some attorneys have a simple fee structure that is easily understood. It may be a flat rate for everyone, or each client may be quoted an all-inclusive rate based on case complexity. However, other bankruptcy attorneys may charge a separate fee for each action that has to be made or an hourly fee.
In addition to his experience as a licensed bankruptcy attorney, Michael J. Benson is also a Certified Public Accountant (CPA). He is uniquely positioned not only to represent you in your bankruptcy case, but also to help you repair and rebuild your finances. Allow us to walk you through your options and put your mind at ease. Schedule a free bankruptcy consultation today.
