Document Type

Article

Publication Date

2022

Abstract

Imagine an individual who is too broke to file for bankruptcy relief.' This irony is far too often a reality in America, especially for people living in underserved communities. Debtors are simply unable to skimp and save up even a thousand dollars to pay their bankruptcy attorney. Paying their bankruptcy attorney upfront in full is the only ticket to seeking Chapter 7 bankruptcy relief. For a variety of reasons, Chapter 7 bankruptcy relief is the most advantageous type for a majority of poor and middle-class individuals and families.4 It provides these individuals and families with an expedient, fresh financial start in life.! In fact, this fresh start is one of the main reasons our bankruptcy system exists.6

Without access to funds to pay their attorney, these folks have only one option when it comes to bankruptcy relief; and having one option is not a choice-it is a mandate.7 These individuals are left to file a Chapter 13 bankruptcy case, which allows for the payment of a debtor's attorney in postpetition installments over time, usually three to five years.' It is certainly an option, but likely not the best one, and it is far more expensive than a simple Chapter 7 bankruptcy.

More than half of those individuals who file for bankruptcy under Chapter 13 have their cases dismissed due to the inability to pay over time.'" If a debtor misses one or more monthly payments over the repayment period in a Chapter 13 case, they are at risk of having their bankruptcy case dismissed without any benefit from the bankruptcy discharge." In other words, they will be in worse shape than when they began the bankruptcy process.  While a Chapter 13 bankruptcy case offers debtors some relief, it is a far cry from the type of relief that is afforded to debtors under a Chapter 7 bankruptcy.

This Article will examine the history of current practices regarding debtors' payment of bankruptcy attorney's fees in Chapter 7 cases." Such examination will reveal the barrier that many people face in trying to obtain a fresh financial start. Next, it will scrutinize the disparate social impact of current payment practices on debtors' chapter choices and their eventual case outcomes. This part will shed light on the fact that one's ethnicity may play a role in the type of bankruptcy relief they can obtain and their ultimate chance for success.

This Article will then study what has likely been the most successful workaround that debtors' attorneys have employed to mitigate the harshness of requiring their clients to pay them in full upfront before filing for Chapter 7 relief. This workaround is called the two-contract approach, which results in a bifurcation of legal fees for prepetition and postpetition work. The benefits and detriments of this approach will be explored and examined.

In closing, this Article will propose some legislative solutions to remove the obstacles to debtors' access to Chapter 7. The author will propose an original and workable bipartisan solution to this problem that will include a federal exemption for the debtors' firearms. This is a unique and somewhat controversial proposal, but it will hopefully generate enough support from both major political parties. Legislative changes are the most reliable and universal option for increasing access to Chapter 7 relief for those who need it most. Thus, a serious compromise is necessary as a means to an end.

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