If you are considering filing for bankruptcy protection, you are probably wondering how you will be able to afford an attorney to represent you. Many debtors, family and friends help pay the legal fees. However, before you take this route, be sure you know the potential problems that can result:
•If you are filing a Chapter 7 case, you must pass the “means test." For more information on the means test, read my blog titled “Means Test in Chapter 7 Bankruptcy." The court will consider all income received (from all sources) by you in the 6 months prior to your filing date. In other words, the money given to you by family to pay for your bankruptcy lawyer will be considered income to the debtor (if it was given within the applicable 6 months).
•If you are filing a Chapter 13 case, the court will consider all income received (from all sources) by you in the 6 months prior to your filing date to determine the plan commitment period. Again, if your family member gave you funds to hire a bankruptcy attorney within this 6 months, the court will consider it income to the debtor. •Depending on the level of the debtor’s income, and the amount of assistance received to pay the legal fee, the additional contribution could raise the debtor’s annualized income for purposes of the means test. If it raises your income above the allowable limits, you could be disqualified from filing a Chapter 7 case. In a Chapter 13 case, it could mean that the court may require that your Chapter 13 plan last for 4-5 years rather than only 3 years.