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Attorney Chapter 13 Tricks


Chapter 13 bankruptcy attorneys rip off debtors everyday and it is all legal. If you are considering hiring an attorney for chapter 13 bankruptcy, think twice. You will almost certainly get ripped off by your lawyer and perhaps not even know it.

Have you been told that you do not qualify a for chapter 7 discharge?

If you have been told that you make too much money to qualify for a chapter 7 bankruptcy, then read this.

It used to be that 10 or more years ago, only 25 percent of debtors filed chapter 13 bankruptcy. The rest filed chapter 7. Today half of all bankruptcies are chapter 13. This huge shift came about partly because many bankruptcy lawyers discovered a loophole in chapter 13 bankruptcy rules that allowed them to hide their fees in plain sight. They figured that they could tuck their high fees into the repayment plan. Here is how it works.

Under a chapter 7, once the bankruptcy is filed, no unsecured creditor can collect any more money from the debtor, PERIOD. This means that if you hire a chapter 7 attorney, they can only get their money from you before you file bankruptcy. Once you file, they become like any other unsecured creditor who get nothing more.

In chapter 13 cases, the rules are quite different. Under chapter 13, you are supposed to repay your creditors and so chapter 13 bankruptcy lawyers are granted the special status of super creditor by the trustee. This means that they will get paid through the trustee after the bankruptcy has been filed. Because of this, a lot of chapter 13 attorney will ask for a down payment of as little as $100 to file the bankruptcy, knowing all along that they will get paid as much as $7,000 through the trustee.

But they will not ask you for $7,000 upfront. Instead they will say something like, "we will take a deposit of only $100 to get started and then you will pay us only $200 per month through the trustee in your monthly payments." To a debtor facing foreclosure, this seems like very little for all the lawyer will supposedly do for them in the next 3 to 5 years. But in reality, it does not really work out like that.

Once the chapter 13 repayment plan has been confirmed, the trustee will turn around and pay only the attorney and ignore all of your real creditors until the attorney has gotten all his or her $7,000.

Once the chapter 13 bankruptcy attorney has been paid in full, the trustee will then start to pay the real creditors. So if your repayment plan calls for you to pay $600 per month through the trustee, none of your creditors will get paid for a whole year until the lawyer has gotten all his or her money

If you still cannot see what is wrong with this, then consider this...

More than half of all consumer chapter 13 bankruptcies will be dismissed or abandoned in 6 months and by 12 months the vast majority of them have been abandoned by the debtor. So in essence, the only person who will get repaid in your entire bankruptcy is your chapter 13 bankruptcy lawyer.

That is literally like you walking into a random lawyer's office and saying to him, "Look man, I am broke and cannot afford to repay my creditors, so here is a gift of $7,000 from the goodness of my heart just because you are a lawyer"

How else can you explain filing chapter 13 and handing $7,000 over to your lawyer in exchange for nothing? This is the biggest secret that chapter 13 bankruptcy lawyers do not want you to know.

Now that you know, you have no excuse.

You may wonder why anyone would abandon their chapter 13 after paying the lawyer so much. The reason is that most secured creditors such as your mortgage company will not like to wait for a whole year to start getting paid, so many of them will get the court to allow them to continue the foreclosure in spite of the chapter bankruptcy. When that happens, the debtor abandons the bankruptcy since it is no longer of any use.

For those who do not have a foreclosure, they abandon or dismiss their bankruptcy when they realize that their debt is growing from later fees, penalties and interest charges while the wait for the lawyer to finish getting paid. They realize that they cannot win and they quit the chapter 13. It is almost like life insurance where only 15% of the people die quickly enough to collect of the policy.

You do not need an attorney to file chapter 13 and if you use one, be ready to have him or her ruin your bankruptcy. Remember that bankruptcy trustees are also bankruptcy lawyers. Trustees can represent debtors as their attorney one day and then change hats and sit as trustees the next day handing out the money to their buddy attorneys. This conflict of interest should be illegal but it is not.

Your chapter 13 will work if your file it yourself or if you use a full-service bankruptcy company since there will be no one in the middle to suck you dry. Some of our best friends are attorneys, but the truth is the trust and someone ought to tell it like it is.

Now you know!

Have you been told that you do not qualify a for chapter 7 discharge?

If you have been told that you make too much money to qualify for a chapter 7 bankruptcy, then read this.

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