Payment Plans in Chapter 7 Bankruptcy

Some bankruptcy attorneys hide the ball when it comes to the true cost of bankruptcy. We do not and you can get some real numbers about bankruptcy fees in Massachusetts on our website. However, I wanted to write here about payment plans. My experience is that more than half of consumers these days do not have sufficient funds to pay for bankruptcy upfront and need a payment plan. We work with people in this situation every day and offer payment plans that are clear and honest manner--but they work differently in the different chapters of bankruptcy.

Chapter 7 Bankruptcy Payment Plans
The key with payment plans for Chapter 7 cases are that all fees and costs must be paid before the case is filed. At first glance, this may disappoint you, but for 99-plus percent of people it's not a problem. There are a couple of factors to keep in mind.

• First, this is the only legal way to offer a Chapter 7 payment plan. If an attorney extends a payment plan into the period after a Chapter 7 is filed, he or she is breaking the law. This is because unpaid, pre-filing fees cannot be collected after a Chapter 7 case is filed due to the automatic stay. Any bankruptcy lawyer who would consider offering an illegal payment plan is either ignorant about basic bankruptcy law or is playing fast and loose with the rules. You do not want this. In general, the Court will not excuse you from the law just because you were following the advice of an unethical lawyer.
• Second--and this is key--the payment plan period usually overlaps with the pre-filing process. In other words, you and your lawyer need time to prepare your case for a successful filing. This work is done along side the payment plan. Once the payments are made and the work is completed, the case is filed. One extra thing we provide is a service to handle creditor phone calls while you are in the pre-filing process. This makes the payment plan process comfortable by giving you some breathing room. Ask about this if you decide to call us.

For my next installment in this two-part series, I will explain how payment plan work in Chapter 13 bankruptcy. You can read more about us and Massachusetts bankruptcy in general here.