How a Good Lawyer Saves You Money (Despite Nominally Higher Fees)

by Jeremy J. Cobb on Dec. 07, 2019

Bankruptcy & Debt Bankruptcy Bankruptcy & Debt  Credit & Debt 

Summary: Choosing the right attorney for your chapter 7 or chapter 13 case can ultimately save you money, even by comparison to filing pro se (without counsel). In many cases, this means selecting the right chapter under which to file your case. There are certain advantages uniquely associated with chapter 7 or chapter 13 (the most common) proceedings.

Choosing the right attorney for your chapter 7 or chapter 13 case can ultimately save you money, even by comparison to filing pro se (without counsel). In many cases, this means selecting the right chapter under which to file your case. There are certain advantages uniquely associated with chapter 7 or chapter 13 (the most common) proceedings.

Chapter 7 Cases
Your attorney may save you money by either avoiding the means test altogether or using other strategies (for instance, relating to household size) to ensure that you qualify for chapter 7 if it suits your needs and goals. Your chapter 7 bankruptcy attorney may be able to save you money by exempting and requiring certain creditors to return payments you made prior to filing your bankruptcy petition. Yes, this really means money back that you are entitled to keep! This can amount to hundreds—even thousands—of dollars. Your attorney can save you money by selecting the right exemption scheme (state or federal) according to which benefits you more (permits you to keep exempt property of a greater value if there is a difference in your case). Your attorney can save you money by surrendering certain property to the lender, allowing you to walk away from a bad deal with no strings attached; or, alternatively, by helping you refinance certain property (such as a vehicle) through the mechanism of redemption, forcing the lender, effectively, to revalue the property if you owe more than it's worth. Your attorney can save you money by avoiding certain preexisting liens on your home or other assets. Your attorney can save you money by ensuring that you case proceeds to discharge (relief from your personal liability relating to your prepetition debts). Your attorney may save you money by negotiating with parties in interest who may file a proof of claim or challenge your eligibility for discharge. If turnover of nonexempt property is required, your attorney may save you money by negotiating with the trustee to obtain a favorable settlement or avoid turnover or other undesirable consequences, such as the sale of real estate, altogether. Your attorney can save you money by defending a motion to dismiss your case (per local rule, your attorney must represent you in these proceedings) or an adversary proceeding (though no representation in connection with adversary proceedings is required by local rule). Finally, your attorney has certain obligations to you relating to the scope of representation pursuant to local court rules. This ensures professionalism and gives you certainty as to what you can fairly expect. And it gives you redress in the event your attorney (naturally, not the right attorney) breaches these standards. This is not an exhaustive list, but it's a start.

Two recent Minnesota bankruptcy court decisions in chapter 7 cases are illustrative:

In each case, choosing an incompetent attorney cost the debtor money.

Chapter 13 Cases
Chapter 13 analysis starts by carefully calculating your income and expenses to arrive at a realistic plan payment you can afford. For instance, you can exclude income received pursuant to the Social Security Act from your income that must be dedicated to the plan. You want a thorough lawyer who pays attention to detail and who is available to consult with you—not an assistant who doesn’t know the law. Affordability is important, since a majority—about 57% according to one study by the Chicago Fed.—of chapter 13 cases do not result in discharge, but are dismissed. This ultimately costs you money because you’ve paid an attorney and made plan payments, but received no meaningful bankruptcy relief beyond the automatic stay. A skillfully crafted plan and aggressive representation save you money (as by accelerating secured debt repayment in the plan at the expense of unsecured creditors).

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