How Much Does It Cost to File Bankruptcy?
Most people contemplating bankruptcy obviously are in a financial bind. As a result, it is natural that one of the questions they ask of a bankruptcy attorney is how much it will cost to file.
This desire to keep bankruptcy costs as low as possible is understandable. Those considering bankruptcy should be aware that the best long-term option that saves the most money is not necessarily what appears to be the cheapest path.
The Costs Associated with Filing for Bankruptcy
The actual cost of filing for bankruptcy protection varies depending on the complexity of your case and other factors as well. Some of these factors can include whether one qualifies for a liquidation or must instead enter into a payment plan. Results (i.e., total funds you have to dish out to the Trustee and/or money that comes back to you) may vary widely depending on your attorney’s care and competence. For this article’s purposes, we will be focusing on fees for Chapter 7 and Chapter 13 bankruptcy cases.
Bankruptcy Court Filing Fees
These charges support the Court’s operation and are standard across the country. Fees will vary depending on how you decide to file.
These costs can vary, depending on the quality of attorney and type of bankruptcy case. This article will review the typical fees associated with Chapter 7 and Chapter 13 bankruptcy, the costs of hiring a low-quality attorney, and the costs associated with filing for yourself.
Required Course Fees
Some courses may be required as part of pre-filing requirements, such as credit counseling or financial management course fees. These can typically range from $20 to $100.
Fees for Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a quick solution for relief from debt and the opportunity to start over financially. It is an excellent option for people who have obtained a large amount of unsecured debt, for example, medical bills, credit card debt, and utility expenses. When filing for Chapter 7, most of these debts are forgiven.
Before pursuing this type of bankruptcy case, you will be required to speak with an approved credit counselor. This is a requirement because filing for Chapter 7 bankruptcy can have a lasting negative impact on both your credit report and creditworthiness. Keep in mind that there will be a fee for credit counseling, estimated to be between $20-$100.
Bankruptcy Court Filing Fees
At the time of this publication, the fee for filing personal bankruptcy under Chapter 7 was $335. Suppose you initially file under Chapter 7 and later convert to a Chapter 13 case. In that case, there will not be any additional fees involved.
Most people initially pay their law firm anywhere from $500 to $2,500 for a Chapter 7 case. The cost for a Chapter 7 may vary depending on whether a debtor needs to file with little or no money down due to a garnishment or can come up with the entire legal fee upfront. Either way, it is best to discuss these choices in-depth with competent counsel.
Fees for Chapter 13 Bankruptcy
There may be reasons why someone who would otherwise qualify for a discharge in a few months under Chapter 7 might instead prefer a wage-earner plan under Chapter 13.
Chapter 13 bankruptcy is an excellent solution for working individuals overwhelmed with large amounts of both secured and unsecured debt. Sometimes this debt is in the form of a mortgage, student loan, or credit cards. Filing for this type of bankruptcy provides an excellent opportunity to restructure your debt and potentially have some of it forgiven. It will also allow you to formulate a repayment plan that will enable you to pay expenses over 3-5 years.
As with Chapter 7, Chapter 13 cases require you to pursue credit counseling as part of pre-filing requirements. Before pursuing this type of bankruptcy case, you will be required to speak with an approved credit counselor. The fee for credit counseling is estimated to be between $20-$100.
Bankruptcy Court Filing Fees
At the time of this publication, the fee for filing personal bankruptcy under Chapter 13 was $310. If you initially file under Chapter 13 and later convert to a Chapter 7 case, there is, currently, a $25 fee involved.
For a Chapter 13 bankruptcy case, most people pay between $3,000 to $4,000. Typically, Chapter 13 might be used to catch up on mortgage payments and save the family home. Cases under this chapter most often fall under the Court’s “no-look” rule, and thus the cost is the same no matter what attorney is employed.
The Truth of “You Get What You Pay For”
We have seen cases where clients have signed up with inexperienced bankruptcy lawyers who have charged very little for their fee but have failed to protect their clients’ assets. One such client came to us for legal aid after the damage was done, and he had lost $11,000 that could have been protected with proper counsel and planning. Unfortunately, there was nothing we could do to extricate him from this mistake.
The downside of choosing overly busy or inexperienced attorneys can have expensive and even disastrous consequences. As mentioned previously, with attorney fees being the majority of the cost of a case, it is understandable that a struggling debtor might be tempted to seek out the cheapest possible lawyer. A billboard or park bench may advertise a local law firm providing bankruptcy services “for a mere $555” or other similarly low quotes. Despite these “teaser rates,” one should be wary of the quality of the services that will be provided.
Bankruptcy is often considered one of the most stressful and daunting times in an individual’s life. Carefully consider, do you want to go through this stressful time with a discount lawyer who doesn’t care about your case and may do the bare minimum? This may lead to not getting the highest quality service. It can also lead to paying more in the long run to creditors and the Trustee than you would have paid to competent and slightly more expensive legal representation.
The Cost of Filing Without an Attorney
Undoubtedly, the fees charged by a lawyer and the Bankruptcy Court appear to be substantial to the average filer. Attorney fees might be the majority of the cost of a case; however, the amount of money saved in the long run should make the expenditure well worth the price.
If you choose to file for yourself or “pro se,” it is vital to know the costs of this decision. You may find that the actual dollar amount you will pay upfront may be low cost at only an estimated $350 – $450. However, it is also important to note that pro se cases’ success rate is drastically lower than cases filed by a bankruptcy attorney.
The United States Courts cautions against filing for bankruptcy without an attorney, stating that it “takes careful preparation and understanding of legal issues.”
With a Skilled Attorney, You’ll Save Money in the Long Run
Competence, loyalty, and knowledge should be the deciding factors when you are looking for legal advice and representation in bankruptcy, not cheapness.
For more information on options to address overwhelming debt and how we can help you with your bankruptcy case, call Benson Law Firm at (216) 230-3543.