How Much Does It Cost to File Bankruptcy?
Do you plan to file a bankruptcy petition? Remember that the associated costs can be substantial, especially if you are paying a bankruptcy lawyer to handle it for you. Before filing a petition, you need to know the answer to the question: “How much does it cost to file bankruptcy?”
The cost of filing bankruptcy will vary depending on your financial situation and where you live in addition to other factors. It can range from $1,500 to $6,500, depending on the complexity of your case, type of bankruptcy, and so on. If you want to learn more about the bankruptcy process and what it will cost to file it, then continue reading.
The Cost of a Bankruptcy: Chapter 13 vs. Chapter 7 Bankruptcy
Bear in mind that Chapter 13 cases and Chapter 7 cases differ in terms of the cost of filing bankruptcy. In both cases, you will be required to pay attorney fees and bankruptcy court filing fees. Additional costs may include an appraisal fee, credit counseling, fees for a consumer credit report, etc.
Can you declare bankruptcy and keep the cash no matter the payment plans? In Chapter 13, debts are reorganized into repayment plans. It allows you to retain vital assets while reducing your credit card debt.
On the other hand, Chapter 7 bankruptcy can help you clear all of your debts. Moreover, you will be able to keep the money, providing that it meets the requirements to be an exempt asset.
How Much Does It Cost to File Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is a form of bankruptcy that allows the debtor to liquidate their assets to pay back their debts. This process is designed for people who are unable to repay their debts and have little or no property. It is worth noting that Chapter 7 bankruptcy does not allow the debtor to keep any property from which they derive “unjust enrichment.”
You may be wondering, what’s the fee for a Chapter 7? When it comes to the attorney fees, they may vary greatly, ranging from $500 to $3,500. This will depend largely on your location and how much your bankruptcy case is complex.
Filing fees are generally equal nationwide. The total filing fees are $338 in the United States. Here’s what these fees include:
- Trustee surcharge: $15
- Administrative fee: $78
- Re-opening a filing: $245
How Much Will It Cost to File Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a form of bankruptcy in the United States that allows individuals to keep all or most of their property while paying off debts over three to five years. It is mainly created for people who want to repay some or all of their debts but are unable to do so because they don’t have enough income.
For an individual to be eligible for Chapter 13 bankruptcy, he must pass the means test and meet certain other requirements. Attorney fees range from $1,500 to $6,000, while filing fees equal $313 in total.
- Re-opening a filing: $235
- Administrative fee: $78
Should You Pay for a Bankruptcy and How to Do It?
In the U.S, getting declared bankrupt is one of the most difficult financial decisions to take. The thought of losing all hard-earned savings and investments can make you shiver in your shoes. So, before filing a petition, ask yourself: “Do you need to file bankruptcy?”
This can be an easy question to answer. The answer usually is yes if your debt is more than $10,000 and you owe credit card bills, student loans, medical bills, and car loans. Other items that can push the debt balance over this amount include unpaid utility bills, rent, and child support.
People who go for Chapter 13 typically have the financial resources to set up a repayment strategy for attorney fees and other debts after they’ve filed. However, those who file Chapter 7 due to financial distress need to pay a lawyer before filing their case.
Methods for Paying Bankruptcy Fees
Not everyone can borrow money from his/her friends or family to pay an attorney and other fees. When filing for bankruptcy, you might feel overwhelmed by the fees, including legal fees, court costs, and the cost of filing.
Still, you can cut down on some costs and pay for the rest by raising the money. Here are other options to cover bankruptcy fees:
- Work out an appropriate payment plan before you file. If you plan to file Chapter 7, try to find out if the filing fee can be paid in installments. Ask the court whether it’s possible or not before setting up a payment plan. Remember that the total fee has to be paid in a maximum of 4 installments and within 4 months of filing.
- Raise the money. You can free up cash for your bankruptcy by minimizing your outgoing cash. For example, do not pay your credit cards anymore. It doesn’t make sense to pay unsecured debts like credit card bills when filing Chapter 7, as it will wipe them out. This way you just throw your money away.
- Look into ways you can earn quick money. For instance, take on a part-time job or sell your possessions like old electronics and put that money toward bankruptcy. Can you ask friends and/or family for help?
- Go pro bono if possible, i.e., find a lawyer who is willing to forgo fees and handle the case without charging you a fee (pro bono representation). Some lawyers work pro bono (free of charge) to help people who cannot pay for their services by dedicating a few hours to their case.
- Aside from that, you should consider applying for a waiver. Sometimes the court waives the filing fee when filing for Chapter 7. However, you’ll have to meet some requirements to be eligible for a waiver.
- Get help from the Legal Aid Society or a free legal clinic.
Related: How to file bankruptcy in Hawaii
What Is the Downside of Filing Bankruptcy?
There are some things you should be aware of before filing for bankruptcy. Be sure to consider them before making up your mind. The following are the most significant risks of declaring bankruptcy:
- A bankruptcy will impact your credit scoring and future financial situation because it can appear on your credit report for 7 to 10 years. Also, Your ability to obtain a mortgage or vehicle loan may be temporarily affected if you file for bankruptcy.
- You are viewed by the law as an unjustifiable bankrupt for 12 months. This means you may lose all authority over your finances at this time and all of your bank accounts are closed. Additionally, the official bankruptcy trustee takes over all of your finances for the next 12 months.
- Your personal property may be seized and sold to pay off your debts. If you are employed or have any other form of income, a percentage of that money can be used to cover your debts.
- If you have a tenancy agreement, the landlord has the legal right to terminate your tenancy agreement. Also, if you are a business owner, the business can be taken over or sold to pay off your debts. This can lead to staff members losing their jobs.
- Many personal debts, such as parking tickets and child support payments, cannot be discharged through bankruptcy. After 12 months, you can apply for a loan again; however, you will have a hard time getting a loan due to lost “financial confidence.”
- Bankruptcy is public knowledge, so it can affect your reputation in the business or wider community. That is why you can be removed if you are in a high-state position.
The Bottom Line
You will probably have a lot of questions when you get started and may need some assistance. That’s why legal aid is essential. Whether you want to file for Chapter 13 or Chapter 7 bankruptcy, it is a good idea to consult a credit counseling agency and an experienced attorney beforehand.
In addition to filing your petition, the bankruptcy attorney will represent you in court and assist you in passing the means test. While it is possible to file bankruptcy without a lawyer, it often leads to mistakes that cause the case to get dismissed by the court. Note that court employees and bankruptcy judges are not allowed to offer legal advice, so it is recommended to seek a pro bono attorney. Legal advice matters!