The law on bankruptcy intends to help debtors settle their obligations to their creditors by either managing or liquidating the business. When a firm files for bankruptcy, the court assists them in paying their debts. Hence, during a bankruptcy procedure, all the financial activities of the debtor are under scrutiny by the court. The debts can be paid either by straight liquidation of the firm's assets or a plan for reorganization to enable the firm to keep on operating while the debts are being paid. The hourly rate for bankruptcy lawyers varies from $100 to $300 an hour. Some lawyers will ask for an advance payment depending on their estimate of how long it will take them to study the case. Others will settle for staggered payments. An attorney could charge from $1,000 to $3,000 for liquidation bankruptcy but could go as high as $3,500 to $5,000 for more complicated business liquidations.
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An attorney may charge for a reorganization bankruptcy from $10,000 to $25,000 but this will depend in which state the lawyer practices. In some states, the charge is higher while in others the charge is lower. The charge will also depend on the size of the business, for instance the lawyer may need a more detailed study before coming up with a definite recommendation. For a small business, this could be from $25,000 to $50,000, for a medium-sized company $50,000 to $100,000, and $100,000 to $500,000 for a large business. The bankruptcy court filing fee is $299 for bankruptcy liquidation and $1,039 for bankruptcy reorganization, which will vary from state to state. Depending on the circumstances, the fees can be paid in installments or can be waived altogether for indigent plaintiffs.
Bankruptcy cases are filed in federal courts and not in any state court. The proceedings in court usually take four to six months, but this is only a rough estimate. Cases that are more complicated may take longer and simpler cases may conclude earlier. Bankruptcy proceedings are an extremely complicated process because all the assets and monies of the debtors have to be closely scrutinized and analyzed. Creditors like bankruptcy proceedings because the negotiations are open and official. That is why a bankruptcy law helps both the debtors and the creditors in settling their obligations. Creditors are willing to compromise on a debt as long as there is hope that the debt would be repaid.
Whether the initial consultation is free or not depends on the lawyer. Some lawyers are fond of giving free advice and others are not. The lawyer will analyze any documents and advise clients on the available options. It is always important to know the experience and training of a bankruptcy attorney before hiring one. Banks and CPAs may be good sources of information on suitable bankruptcy lawyers, and you can even ask other attorneys for referrals. The American Board of Certification maintains a list of lawyers who specialize in your area. This list of attorneys contains lawyers who specialize in business bankruptcy law, consumer bankruptcy and creditors' rights law, all sorted according to location for easy reference.
Your attorney should be able to provide you with a written fee agreement so that you know what you are paying for. This fee agreement should be determined during the negotiation process and should be included in any general agreements with the lawyer. Lawyers should explain the meaning of the various fees clearly, before providing you with their services.
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