Legal fees are debt, and that means that they can sometimes be discharged when you file for bankruptcy. There are some exceptions though, so it’s important to discuss your situation with a Bergen County bankruptcy lawyer before you just assume that any money you owe a lawyer will be wiped out at the end of this process. Depending on how you racked up your debt of legal fees, you may still owe money after your bankruptcy case has been completed.
What Happens to Legal Fees in Chapter 7 Bankruptcy?
When you go through Chapter 7 bankruptcy, you sell off assets and the proceeds are distributed to your creditors. This can include lawyers to whom you owe money. There are often property exemptions that you can take advantage of so that you do not need to sell off absolutely everything that you own, but many of the items belonging to you and your business have to be liquidated in this form of bankruptcy.
What Happens to Legal Fees in Chapter 13 Bankruptcy?
If you file for Chapter 13 bankruptcy, you do not have to sell anything. Instead, you make a payment plan that allows you to pay off your debts over a period of three to five years. You may not have to repay all of your debts, but you’ll end up paying a significant chunk of money to your creditors.
Again, this can include lawyers who have been hounding you for overdue legal fees. They would be paid off over time with everyone else.
When Are These Debts Not Included in the Bankruptcy Process?
There are a few situations where bankruptcy won’t affect your legal fees though. Some common complications include:
Whether those fees are owed to a family lawyer: If you racked up a debt because someone else was trying to get support payments from you, like alimony or child support, those legal fees are not dischargeable through bankruptcy. This is because debts like alimony and child support cannot be discharged, so the legal fees that piled up in relation to these court proceedings also cannot be discharged through bankruptcy.
Accusations of fraud: If it seems like you knew that you were never going to make an attempt to pay a lawyer’s fees, that’s fraud. What you owe them won’t be a part of your bankruptcy case.
Property liens: Sometimes lawyers have their clients sign contracts that allow them to put liens on their property. If you did this, the debt you owe the lawyer is no longer an unsecured debt. It’s a secured debt and you have to pay it.
Talk to a Bankruptcy Attorney
If you are thinking about filing for bankruptcy due to legal fees and other debts, you should have some help. Contact the Law Office of Boyd & Squitieri to schedule a consultation with our team. We can tell you more about how our attorneys can help you with this process.
