In times of financial challenges, it can be hard to find a trustworthy lawyer to pull you out from what seems like a mountain of debt. Although you might be tempted to do it alone, unforeseen complications and hurdles during the bankruptcy filing process can make the decision such a decision regrettable.

A bankruptcy lawyer will be there to guide you through the process and protect you from grave mistakes along the way. The cost of a lawyer cannot be equated to a fixed amount, since there are various factors that come into play. Although every situation is different, here is what you might expect.

Fees Vary By Location 

What might be the average cost in your area might be totally different when you go to another area. Bankruptcy attorney fees mostly vary by district. Sometimes, there are huge differences from state to state. According to a recent study, the average cost of hiring a bankruptcy lawyer nationally, is $1,500 to $2,000.

When this cost is broken down by state, the average fee can go as low as $800 in Idaho and $1,500 in Arizona. You should also note that legal fees in the Southwest are among the highest while those in the Midwest are among the lowest. Under the current economic situation, fees ranging from $1500 to $2500 are considered normal.

Presumptively Reasonable Amounts 

According to the bankruptcy law, judges have the right to examine legal fees charged by attorneys. This also means that the trustee can be refunded some part of the fees charged, if they are deemed unreasonable. To avoid a situation where they are flooded with such cases that require a review of the fees, certain courts have established local guidelines or rules, setting presumptively reasonable fee amounts.

Such fees are more common in Chapter 13 bankruptcy cases. However, some courts have also established the same rules on Chapter 7 cases. Courts differ in terms of the set fees, but the requirements are just the same. Therefore, if an attorney charges an amount less or equal to the presumptive reasonable amount, the court will not initiate a review.

However, this condition is not a fee limit. Attorneys are still at liberty to charge higher fees as long as they have the fees reviewed and allowed. In such a situation, the attorney will provide the court with documentation, on why a particular case requires a higher fee.

Beware of Unusually Low Fees 

If you come across advertisements promising unusually low attorney fees, as compared to what is being charged in your area, you should tread with caution. Such advertisements tend to be deceptive. In most situations, the attorney increases the legal fees once you commence bankruptcy process. It is like a trap.

For example, the attorney usually comes up with excuses that he must charge you more than the agreed amount, since you have a high number of creditors past a certain threshold. Others will charge you higher when you state the process, under the pretext that your debt is beyond a certain predetermined limit.

The truth is, such issues rarely complicate a Chapter 7 bankruptcy case. Therefore, there is no justification why you should be charged a higher amount that what should be the normal charge. Although the complexity of the bankruptcy case and the experience level of the attorney usually determines the fee charged, factors like the debt amount or the number of creditors are not sufficient to change the fee charged.

Sometimes, there may be exceptions especially when a case has an unusually high number of creditors, since such a case will take longer to prepare and document the bankruptcy papers. However, such incidences are rare. It is a common occurrence for an average consumer bankruptcy to owe up to 40 creditors.

Furthermore, a small business bankruptcy can even have tripled that amount. Therefore, the issue of having a high number of creditors does not justify higher legal fees, whichever way you look at it.

There is also the issue of individual versus joint filling. If you are joint filling with your spouse and not individually, that should not be an excuse to increase the fees. In fact, a situation where a married individual is filing alone without involving the partner undergoes a higher level of legal analysis and scrutiny, as compared to when the couple is filing together.

Fee Amounts Don’t Reflect the Attorney’s Qualifications

There is a common misconception that the amount of fees charged by attorneys, correspond to their qualification. This could not be further from the truth. Most attorneys provide a free consultation while others charge a small consultation fee. This fee can be applied to their overall fee if you happen to file.

You should also take this opportunity to assess your prospective lawyer. Your initial consultation needs to be conducted with the lawyer, where he offers legal advice. A good paralegal can assist you with most of the work involved in a Chapter 7 bankruptcy. However, he or she will not provide you with legal advice.

Apart from meeting the attorney, you should enquire about his qualifications and feel comfortable with the advice provided. You also need to get referrals from trusted sources, in your quest to find a good bankruptcy lawyer. Your friend, accountant or another lawyer you trust might be in a position to direct you to a trusted person.

Flat Fees Vs Hourly Charges 

Most bankruptcy attorneys charge flat fees to represent you during the case. This means that you will pay a certain agreed amount for the lawyer to represent you, regardless of how long it takes to conclude the case. However, you need to note that the hourly fee might not be inclusive, which means that you will be expected to pay for court fees as well as other related costs.

If you opt for the flat fee, be clear on what is covered. Additionally, flat fees are non-refundable. Therefore, if you change your mind and decide to change lawyers, you will have to forgo the amount paid to the first lawyer. Other lawyers charge by the hour. In this option, you will have to pay a retainer fee, which equates to a deposit.

Bottom Line

It is hard to quote a ballpark figure, when it comes to fees charged by bankruptcy lawyers. Various factors affect the fees charged. In addition, every case is unique. Just weigh up your options and select the attorney whom you are confident in.