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When complications with bankruptcy filing fees means more trouble

Posted by Ryan Blay on October 29th, 2012 in Bankruptcy, Chapter 13, Chapter 7

Every bankruptcy case requires a filing fee.  As mentioned last week, the filing fee for Chapter 11 bankruptcies is set to increase in November.  Chapter 7 filing fees are currently $306, and Chapter 13 filing fees are $281.  In nearly every case, the debtor filing the case pays their attorney the fee up front, and the attorney pays the fee online through the court’s administration system.  It’s easy, reliable, and ensures a quick payment to everyone involved.

Sometimes, however, filers need help with the fee.  The courts then allow two other options:  paying the filing fee in 3-4 installments, or waiving the fee altogether.  This is more common in Chapter 7 cases, since Chapter 13 cases involve a monthly payment to creditors, which cannot start until the filing fee is paid.

In a recent and bizarre case from Kentucky, a lawyer and his client clearly did not communicate well.  The debtor paid the $281 filing fee to the attorney.  The attorney, however, did not pay that fee to the court when he filed her Chapter 13.  Instead, he kept the money and filed a motion to allow the filing fee be paid in installments.  The case was dismissed when the debtor did not pay the fee in installments.  As you can imagine, the debtor was quite confused when the case was dismissed.  She had paid the $281 and her first plan payment of $100, and didn’t understand why the case was suddenly stuck.

She did what most people will do when their case is dismissed.  She called the bankruptcy court.  She faxed in the proof of the receipt from the $281 and the $100 payments.  The court reinstated the case, and the lawyer called the client to find out what happened.  That’s when the court stepped in.

The court was confused as well why the petition asked for a filing fee in installments, when the debtor clearly paid the filing fee in advance.  It was unnecessary to ask since the debtor had the means to pay the fee in full at the time of filing.   The court issued an order demanding a full audit of the attorney’s bank accounts!

The moral of the story – As attorneys, we should always seek to have the fee paid in full at the time of filing.  But if that can’t be done, and the debtor needs time to pay in installments, communication is essential to prevent the court from punishing the lawyer for questionable practices.


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