Tennessee consumers who are struggling with their financial obligations might be interested to learn that a bankruptcy court in another state ruled that when a debtor's bankruptcy attorney paid the debtor's filing fees, this did not permit the attorney to be repaid before other creditors. Chapter 7 bankruptcy permits a fee waiver in some cases, but this was a Chapter 13 bankruptcy. While in some cases the fee might be paid in installments in a Chapter 13 bankruptcy, the court said there is not a provision in place for the debtor's attorney to pay the fee and then seek reimbursement in the bankruptcy court.
With a Chapter 7 bankruptcy, non-exempt assets are generally liquidated to pay off creditors. Under Chapter 13 bankruptcy, debts are restructured and repaid pursuant to a court-approved plan that lasts for either three or five years depending on the debtor's income.
In this case, the debtor's attorney argued that the filing fee was a necessary part of preserving the bankruptcy estate. However, the court argued that the loan benefited the debtor and not the estate. The court also said that approving the attorney's request could end up putting the burden of the fee on creditors.
People who are financially burdened may have a number of options for debt relief, and an attorney may be able to review them. However, if options such as working out a payment plan with creditors still leave them struggling with daily expenses, they might want to consider filing for bankruptcy. This is generally not an option for student loans or past-due income taxes, but many other types of unsecured debts can be discharged.