The Cost of Chapter 13 Bankruptcy, Part 1.
In 2013, there were 3,223 Chapter 13 bankruptcy cases filed in the Southern District of Alabama. Of those, I would estimate that in only 3,220 of those cases did the debtors have any idea how their Chapter 13 payment was calculated. Why? Well, the majority of those cases were filed by a handful of high volume bankruptcy mills, and when you hire a volume filer, you’re lucky to get 30 minutes of face-time with your own lawyer to discuss the basics of your situation. So getting an actual explanation of how your payment is calculated is out of the question.
Even in the cases where the debtors were represented by good lawyers, very few clients understand exactly what happens. From the client’s perspective, here is what you see. You go in to talk to your lawyer. You answer their questions. If they’re a good lawyer, they answer a few of your questions, too. After reviewing your paperwork, the lawyer scribbles some things on a notepad, punches some digits on a calculator, while you sit there wondering what the hell he’s doing.
Then his head pops up and he says “OK, your monthly payment will be $425/month for five years. That includes the 2012 taxes, the ’07 Silverado, and all of your credit cards.”
And inside you think “WTF?”
But because you don’t want to look like an idiot in front of your apparently serious and sophisticated lawyer, you just say “And that’s all I have to pay?”
“Well, and your monthly mortgage payment and ongoing utilities. But basically, yeah. That $425 covers all of your debt.”
And since you had previously been hemorrhaging $1300/month on credit card bills alone, you wonder how the hell that’s possible. But you don’t ask because your lawyer is clearly getting antsy about you still sitting there in his chair without committing to signing up so he can move you along to a paralegal and collect your $3,000 in 6 months. So you say “OK well that sounds good.” And that’s it.
Many clients don’t care. They came in with a pile of bills and stress they couldn’t afford and they leave with a payment they can afford. That’s all they need to know. But for those of you who still have the burning questions – here is your answer.
>>Next Page: How Your Lawyer Calculates your Monthly Payment>>
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