How Do I Pay For Bankruptcy? - Justin

“Dear Steve,

Hi Steve, Ive been to my second lawyer yesterday to seek advice on doing bankruptcy. He was very informative and knew his stuff. He suggested a chapter 13 that would leave me with everything and possible payments of $100 a month or less for 3 yrs. I could get rid of my now $67k in credit card debt and my second mortgage of $25k, not a bad deal. The problem is it would cost me $3500 for the whole thing.

Should I take money from my 401k to pay the lawyer? I only have $1400 I can access, and a hardship withdrawal does not allow for my situation.

Justin”

The Answer:

Dear Justin,

Paying for bankruptcy is a perpetual problem. Some lawyers actually offer a payment plan that allows for you to make payments for their fee.

Otherwise I think you’ll need to do what you need to do to get what cash you can to put this behind you and move on. Hopefully between what you can get your hands on and a potential payment plan from the bankruptcy attorney you can get this moving forward.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Justin
Steve, Long time since I commented to you,but I thought I would update you. The first lawyer I spoke with needed $1500 to get the process going and than the payments in the chap13 would cover the rest. I finished paying him about 2 weeks ago and just last Thursday I signed papers to have it filed on Friday. The lawyer estimated my payment to be around $155 a mo for the next 3 years. The payment will be taken right out of my paycheck (garnishment) and this will clear up my debt of $74k and a 2nd mortgage of $25k….not a bad deal. I don’t think I will ever get a credit card again.

http://GetOutOfDebt.org Steve Rhode
Justin,
That must be a load off your shoulders. Nice to finally have some protection in place to allow you to move on isn’t it?
You will have access to credit again and it is important that you plan to do so otherwise your credit history ends on a down note. After the bankruptcy gets going we can work on that.
Steve

Carl H. Starrett Ii
I can’t say for certain if the particular Chapter 13 trustee assigned to your case would object to continued contributions to your 401(k), but you made draw an objection to confirmation of the plan. This is something that should be discussed with a local BK attorney who knows the case law in your area.
If you are having trouble finding someone to work with, try the website for the National Association of Consumer Bankruptcy Attorneys: http://www.nacba.org/attorneyfinder/. You might someone who can work with your current budgetary constraints.
Justin
I was unaware of having to stop paying into my 401k, it didn’t occur to me since they won’t touch it in a bankruptcy. I had thought about skipping a mortgage payment, but the risks are a bit too high for my taste. I don’t think this lawyer wants to take a payment plan aince he knows how tight I am right now and he even suggested the possibility of a no-payback chapter 13. Thanks for the tip.
http://www.chs-law.com/rss.xml Carl H. Starrett II
One of the differences between Chapter 13 and Chapter 7 is that Chapter 13 allows some of the fees to be paid over time. My personal policy is to collect 1/2 of the legal fees and and all of the anticipated hard costs before filing a case.
In order to qualify for Chapter 13, you will probably need to cease contributing to your 401(k) and then will free up some money. If you haven’t already done so, top making the payments on your credit cards.
A more risky strategy would be to skip one or two mortgage payments and use that money for legal fees. Chapter 13 can be used to get caught up on the mortgage, but you do risk foreclosure costs and late fees being added on to the amount that you must repay in your Chapter 13 case.
.-= Carl H. Starrett II´s last blog ..Paychecks for California Employees Shrinking For The Rest of 2009 =-.

http://GetOutOfDebt.org Steve Rhode
Carl,
You read my mind. I was hoping you’d weigh in on this one and there you are. Awesome.
Thanks for the comment to help Justin. He’s a good guy that has been stuck in a bad situation for a long time.
Steve

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