Games and Gimmicks versus Respect and Professional Representation with Your Family’s Best Interests in Mind
“File bankruptcy for $0 down . . . “ ”File Chapter 7 for no or very little money down.” “File bankruptcy for only $_____ down.” You may have seen these ads and you may be tempted by how attractive they seem on the surface. However, falling for one of these gimmicks may not be your best option to eliminate and manage your debt. In fact, with respect to chapter 7 bankruptcy the gimmick of “file now pay later” may not even be allowed by bankruptcy rules and may actually keep you from getting a fresh financial start.
Attorney fees are paid to compensate an attorney for services performed and can be a good investment for you and your family’s future. However, some attorneys offer their services as “unbundled.” This means that they may insist you enter into a written agreement before they file your bankruptcy that artificially divides up the fees for services between “before filing” (usually including the petition – essentially the cover sheet of a bankruptcy case) and “after” the petition (but not the rest of the case) is filed with the bankruptcy court. One of the first things you need to know about this approach is that courts have determined that such an artificial division or “unbundling of services,” with payment of insubstantial fees before the case is filed and an agreement to pay most of the fees after the case is filed, creates a potential conflict of interest between the attorney and the client, may create undue and improper pressure on the client to pay the attorney, may be directly contrary to the bankruptcy rules and is almost certainly disfavored by courts even under the most carefully crafted circumstances.
Consider the following portion of one court’s written opinion (In re Grimmett, 2017 Bankr. LEXIS 1492, United States Bankruptcy Court for the District of Idaho, June 5, 2017):
“[the attorney’s] intentions were transparent in this case. Its reliance on the terms of the Agreement it drafted, coupled with its willingness to aggressively pursue fee collection from Debtor while she was still attempting to obtain relief in the bankruptcy case, were parts of a strategy designed to leverage Counsel’s position at a time when Debtor was most vulnerable to such tactics. . . . whatever justifications there may be for an incomplete filing, utilizing that practice solely as a means to secure payment from Counsel’s own client is indefensible. . . . A cruel irony flows from this situation. Long ago, Congress laudably declared that honest, but unfortunate, debtors should not be punished for their financial problems. It carefully crafted the Code to give such debtors a financial fresh start and relief from the burdens of their debts. But Counsel’s use of the Agreement flies in the face of the noble purposes of Code. While Counsel promises to help its debtor-clients secure their fresh start, if for some reason they cannot pay fees, the Agreement prominently reserves Counsel’s right to threaten to abandon them in bankruptcy court under pain of dismissal of their bankruptcy cases. . . . Counsel is apparently willing to pursue collection from debtor-clients by referring their accounts for collection and garnishment of their wages, the precise sorts of creditor activities that bankruptcy is intended to curb. Here, Counsel’s tactics potentially threatened Debtor’s ability to obtain a discharge, and the fresh start and financial freedom it brings. To take advantage of her in this way was reprehensible.”
Thus, with respect to chapter 7 bankruptcy there is case law which has determined that the “essential services” required for a chapter 7 bankruptcy cannot be “unbundled.” Courts have also determined that if a client owes their attorney any money for the essential services of the bankruptcy case after the case is filed, even for services yet to be performed, the attorney is a creditor of their client and the money owed to the attorney is subject to discharge. This means those fees may not be collected by the attorney and the client may not be compelled to pay their attorney after the case is filed. Consider once again the words of one court addressing this situation:
According to Counsel’s own disclosures, it received only a portion of its fees from Debtor pre-petition, and it intended to collect the remaining fees owed to Counsel under the Agreement post-petition [after the case is filed]. According to the case law, if Debtor owed any fees to Counsel for pre-petition services, that debt was discharged . . . Counsel offered insufficient evidence to identify and establish the value of the services it provided to Debtor after the filing of the bankruptcy, and the Court declines to presume those services were worth the amount Counsel was attempting to collect. Absent such proof, Counsel has not established that it was entitled to payment of any fees beyond those already collected from Debtor [before the case was filed]. And if Counsel was attempting to collect fees for pre-petition services, Debtor’s obligation to pay him was discharged, and Counsel likely violated the automatic stay in pursuing collection from Debtor.”
Of course most people would not set out to enter into an agreement where they do not intend to pay their attorney. However, it is clear that an attorney must collect payment in full for the essential services of filing a chapter 7 bankruptcy and representing the Debtor through the chapter 7 process before the case is filed. If not, the attorney may not collect or compel the client to pay the attorney for services that are an essential part of the bankruptcy filing process after the case is filed. If you enter into such an agreement you may turn your attorney, who you hire to be your advocate, into your adversary. Perhaps you may be sued by your own attorney. This is not the sort of attorney relationship anyone would want. It is not the kind of relationship that is best for you and your family.
A decision regarding your options to manage and gain relief from debt, including potential bankruptcy, is never easy. Overwhelming debt can be not only stressful but can distract you from other important matters in life including family, work and relationships with others. A sense of desperation is not unusual. Desperation may naturally lead to action which appears to be the answer to managing and eliminating your debt, but may not actually be in your or your family’s best interest. Potentially misleading or even potentially unethical advertising gimmicksmay sound appealing when overwhelming debt creates desperation. Despite the pressure of overwhelming debt you need to meet with an attorney who only has your best interests in mind.
At Kinkade & Associates we do not give “one size fits all” advice. We do not use gimmicks to push you and your family into one of the most important financial decisions you will ever make. At Kinkade & Associates we never steer you into a bankruptcy that is not your best option. We never use gimmicks that may create a potential conflict with our clients. We never put you in a situation where you may be sued for non-payment of our attorney fees. If you hire us to work for you it is only after you meet with an attorney, after discussing your circumstances in great detail with an experienced Kinkade & Associates bankruptcy attorney and after you learn which bankruptcy option offers you the best potential outcome. We have built our practice around the concept of RESPECT for you and your family and providing to you and your family the best service possible. That respect and service begins with a personalized in-person assessment of your situation and continues through the entire process. When you call us you reach a caring professional. We don’t use a “telephone tree” that requires you to push endless buttons or places you on hold. We follow bankruptcy rules. All of this is part of the personal and professional service that we know is important to you and sets us apart from other firms.
At Kinkade & Associates we have the experience and are absolutely committed to helping our clients rebuild their financial life. This is not just a slogan. This has been our mission on behalf of clients for the past 14 years of providing debt relief and continues to be our number one priority and goal for each of our clients. As you consider who you will hire as an attorney we invite you to consider “Our Pledge to Clients,” and our reputation. We invite you to set an appointment with an experienced Kinkade & Associates attorney so that we may provide to you complete information about your options. We invite you to compare our experience, dedication, reputation and rates with any attorney in the area. We welcome the opportunity to meet and talk with you about your options to rebuild your financial life! No games, no gimmicks, only respect and professional representation with your family’s best interests in mind.