How do bankruptcy attorneys get paid?
In: Economics
It depends on the type of bankruptcy being filed. For your average consumer, you’re talking about Ch7 and Ch13 bankruptcies.
Ch7 is a “liquidation” where the debtor offers up property in exchange for not being liable for debts and Ch13 is where they offer up disposable income in a generally favorable repayment plan over a fixed 3-5yr period.
In a Ch7 case, attorneys will generally want their fee to be paid in full prior to filing as they would be considered an “unsecured debt” and discharged right along side everything else eligible. In other words, they want to be paid first so they don’t work for free.
In a Ch13 case, attorneys fees are rolled into their repayment plan.
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