Does a lawyer benefit from me paying the entire amount instead of negotiating a %?

[CeCe74]

I just went to a bankruptcy lawyer and he stated that I had to pay back the entire amount I owe ($36,000) ... Why won't he negotiate for a percentage of the amount to pay back? Does the lawyer get a percentage of the money that I pay back?

[HHM]

I am afraid we need a little more context. I am guessing you went to see a lawyer that was representing a creditor (i.e. collection lawyer), in which case, YES, he most likely will receive a percentage of any amount collected. However, lawyers act on directions from their clients.

Please fill in the context.

[CeCe74]

No, he is not a collection lawyer ... I went to him because a friend recommended him. He represented her about 7 years ago. The reason I went is because a collection agency contacted me and told me that they were going to garnish my wages out of my pay check if I don't pay them. I obviously could not pay them. I accrued the debt because of foolish spending in my youth and now it is consists of mainly interest. This has been worrying me for the last 12 years and I really want to take care of it so that I can start building good credit. However, I am really worried that I won't be able to pay the $1100 the attorney wants me to pay over the next three years. I was hoping to pay a percentage of the amount. After, all my expenses this will leave me with $200 a month and I still have the $2200 attorney fee as well as filing fees and any other fees. Also, the attorney's agreement that I signed clearly states that if I am behind on car payments the car dealership can take the car...at the moment I AM NOT BEHIND, and that he can not be held accountable. HOWEVER, he wants me NOT to pay the January payment (probably use the money to pay part of what I need to to pay him) ... this does not seem right to me ... I almost want to write up a contract or something that will hold him accountable if my car gets taken. Is this an option?

[CeCe74]

Just to clarify that would be $1100 a month over the next three years

[HHM]

Ok Ok

As to your first question, the answer is no, the attorney does not get a percentage of the amount you pay into the plan. (although some of his fees will be paid through the plan, its not a percentage, The Chapter 13 Trustee does gets paid a percentage of all monies paid into the plan). You will have to come out of pocket for the filing fee and some attorney's fee, but a good portion of the $2200 in attorney's fees will be paid through the chapter 13 plan.

Is the debt really 12 years old, and what kind of debt is it? When was the last payment you made on that debt, its at least possible the debt is outside the statute of limitations in which case, you don't need to do anything.

In a chapter 13, prior to filing the case, you can fall behind on secured debt because the Chapter 13 allows you to make-up payment arrears on secured debt like cars and homes. If you fall behind AFTER your case is filed, then yes, the finance company can take your car.

Under a chapter 13, you are required to devote all you disposable income to the chapter 13 plan. If your disposable income will pay the debt 100% then so beit, it pays the debt. The plan under a chapter 13 is based on your disposable income. If you only have enough to pay 50% then you pay 50%, if you have enough to pay 100% then you pay 100%. You cannot arbitrarily change the amount owned. My guess is, if your attorney is saying you have to pay $1100.00 per month, that you have significant income and/or your expenses aren't very high. Also, your attorney may be inclucding in that $1100 a cram down payment on your car (i.e. you get to pay the balance of the Market value of the car determined at the time of filing, which can save money over the original contract, which means your car payment gets paid through the chapter 13 plan).

All in all, except for the high monthly payment, everything sounds fairly normal in your situation.

[sophie]

Hi,

I don't understand why someone would file bk if they have to pay back 100% of the debt anyway? If I could pay back the debt I wouldn't file. I've asked this question over a few different boards but no replies yet.

Thanks!

[SinkingFast]

Hi,

I don't understand why someone would file bk if they have to pay back 100% of the debt anyway? If I could pay back the debt I wouldn't file. I've asked this question over a few different boards but no replies yet.

Thanks!

There are a couple of important reasons to file BK even if you're in a 100% payback situation.

The Automatic Stay. Under BK, your Creditors cannot harass you. You are protected from the threat of letters, collections, phone calls, you name it. Even if you're in a DMP thru a reputable Agency, the Creditors are still free to call you or send you letters.

The interest rates. The Creditors can't just summarily decide they want to jack your rate, thereby increasing your monthly payment to the point that you pay next to nothing on principal. The $$ amounts the Creditors can get total are set the day you file BK. That's all they can get and not one penny more. Once you're done with your BK plan payments, your debt is discharged and you are done with your Creditors.