The Truth About Zero Down Bankruptcies

Your credit cards are maxed out, bill collectors will not stop calling, and you are behind on your mortgage payments. Your finances have been upside down for months, and no matter what you do, you can’t seem to dig your way out. When you are struggling financially, the idea of filing for bankruptcy with absolutely nothing paid upfront for legal services can be tempting. There are countless advertisements out there, enticing people to file for bankruptcy with “no money down.” But like so many things in life, if it sounds too good to be true, it usually is.

Filing for bankruptcy is a complex process. Although, Chapter 7 is the most common form of bankruptcy, not everyone is eligible to file for it. In most normal cases, you pay your attorney prior to filing for bankruptcy. These fees include the filing fees and other costs that are required to be paid upfront, including payment for the pre-bankruptcy course that is required of all filers, but this payment also covers the attorney’s fees for preparing all necessary documents for filing, as well as other work after the case is started. In these “no money down” bankruptcy cases, however, the bankruptcy attorney only requires you to pay the upfront filing costs and not the attorney fees. Payments to the attorney only come after the bankruptcy case has been filed.

What does this mean. The Court has ruled that filing a case before the attorney gets paid is allowed ONLY if the attorney had you sign two contracts. Once before the filing and one after the filing. That way the attorney can collect his or her fees even though all your debts were wiped out. Since you are signing a second contract after the bankruptcy has been filed, an attorney is entitled to collect his or her fees since the contract was signed “post-petition”.

The problem is most filers are desperate to get out of their bad financial situation that they will take any deal that is offered to them. The attorney’s office will then sign you up for a payment plan through a third-party company, always through automatic payments made on a monthly basis.

Some of the worst offenders take automated clearing house (ACH) payments directly out of your bank account, which is an unethical practice. When all is said and done, you, as the client, end up paying far more than you would have had if you had paid the attorney’s fees from the start of the case. And if you do not make your bankruptcy payments, they will pursue you exactly like a typical debt collector would, making you feel like you are back in debt just like before.

The catch to the zero down bankruptcy is that most clients are not aware of just how much they will be spending in the long run, and the attorney offering the “deal” normally does not take the time to go over costs and provide an estimate on a final value that will be paid via automatic payments. The hope is that you will be so desperate to take the deal that you will not worry about what it will mean for you in the end.

A no money down Chapter 7 bankruptcy should not be confused with a Chapter 13 bankruptcy case. Chapter 13 cases often require no attorney fees to be paid upfront. Instead, the attorney’s fee can be made part of the payment plan that is approved and overseen by the bankruptcy trustee. Unlike an ACH payment plan for a zero down Chapter 7 bankruptcy case, a Chapter 13 repayment plan is highly regulated and must be approved by the court before it is implemented.

Take our advice, BEWARE when it comes to ‘zero down bankruptcies.’

Despite all this, there is still a place for Zero Down bankruptcies, in my humble opinion. At the Benenati Law Firm, we also offer it but only in specific situations where the client is facing an active garnishment and the client is the sole breadwinner of their family. The best course of action is to meet first with an experienced bankruptcy attorney for a consultation. Most bankruptcy attorneys offer free consultations. The Benenati Law Firm offers affordable payment plans and reduced rates to those who qualify. We believe bankruptcy should be an affordable option to all.

If you have questions on this topic or are struggling with debt, call our law firm today to schedule a free consultation. Having debt makes you stay up at night. It stresses you out. It ruins relationships. I went through it. I found the courage to call a bankruptcy attorney and I pressed the restart button in 2008. I never forgot what it did for me and how it helped me start over.

To date, The Benenati Law Firm  has eliminated nearly a billion dollars of debt for its bankruptcy clients. Our firm is the largest filer of consumer bankruptcy cases in the nation. Go to or call 407-777-7777 to set up a free private consultation. Because Life Has a Restart Button.