Some of my bankruptcy clients want to charge my fee to a credit card. It’s quick and easy and, before a bankruptcy is filled, many debtors still have access to some credit cards (although all credit cards are closed the day a bankruptcy is filed – read more about this here). But I don’t take credit cards. I don’t think it’s ethical, and here’s why.
Credit Cards Often Contributed to Clients’ Debt Troubles
Many of my bankruptcy clients have overused or even abused credit cards. It’s frequently what’s gotten them into the trouble that eventually lands them in my office. At minimum, virtually every debtor I represent discharges some credit card debt in their bankruptcy, even if that’s not the major source of debt that drove them to declare bankruptcy. I counsel clients against using credit cards, at least until they can afford to again, on my website. So, if I accept credit cards, don’t I sound like a hypocrite? I think so. And I don’t want to be a hypocrite. I think that makes me untrustworthy.
Credit Card Company Stuck Paying Lawyer’s Fee
There’s an even more troubling issue if a bankruptcy attorney accepts credit cards. All the debt sitting on a client’s credit card – including attorney fees –is erased the moment a bankruptcy is filed in U.S. Bankruptcy Court. Bankruptcy attorneys know that when they are paid by credit card, their client isn’t paying them – effectively, the credit card company is paying the attorney. How? When the bankruptcy is filed, and the credit card debt filed, it becomes “bad debt” for the credit card company. They end up holding the proverbial “hot potato” – in this case, they’re paying for everything the debtor charged but didn’t pay for on that credit card. I think making a credit card company pay my fee, rather than my client, is just wrong.
Fraudulent Debt
And the law says it’s wrong, too. If someone incurs a debt they don’t intend to repay, that’s fraud. Fraudulent debts can’t be discharged (wiped out) in bankruptcy. And the bankruptcy code assumes that credit card charges incurred within 90 days of filing bankruptcy are not dischargeable. If charged that close to filing, my client will end up paying my fee anyway. I think it’s better not to tempt clients to either let credit card companies take on their debt or make to fraudulent charges.
How to Pay Instead?
So, if I don’t accept credit cards, what payment methods do I use, or approve of? I accept four forms of payment: cash, check, Zelle and bank wire transfers. I think Venmo is also a fine form of payment, though I don’t use it.
If I were looking for a bankruptcy attorney, and they accepted credit cards, I sure would like to know the answer to this question: “How isn’t it wrong for you to ask credit card companies to pay your fees, and ask me to continue my reliance on credit cards?”
December 29, 2021