If you’ve had a perilous time due to financial hardship, or you’re in a state where you’re considering bankruptcy, but you don’t know its cost implications. You’re not alone in this. A number of people are perplexed about how they can afford to pay for the cost of a Chapter 7 bankruptcy case when they can barely get by with available resources. It’s a very common occurrence, but some people say that it's too expensive. This spurred us to create a free bankruptcy cost estimator, where users can get a personalized idea of what it’ll cost them to file for a bankruptcy discharge.
In this article, you’ll learn the following:
Let’s begin the article by estimating your potential bankruptcy cost; then, we’ll elucidate on the factors determining the cost. You may also be opportune to get a free bankruptcy consultation with a local attorney.
In filing for bankruptcy, it’s imperative to understand that there are both fixed and variable costs. And both need to be taken into account. The costs that makeup fixed costs include filing and administrative fees, while variable costs include attorney fees. We’ll give you a detailed breakdown of the fixed costs to expect below, while we will enjoin you to use the bankruptcy cost estimator to calculate the prospective cost in your city of residence.
Fixed Costs: As given by the US courts (source), you’ll pay a total sum of $338 as filing cost for your Chapter 7 bankruptcy. This cost include $245 for the filling fee $78 for the administrative fee, while $15 will be charged as a trustee surcharge. The filing cost for Chapter 13 bankruptcy, on the other hand, is $313 ($235 as filing fee and $78 as administrative fee).
Variable costs: The variable cost here is according to your attorney fee. In our article on bankruptcy attorney fees, we wrote that the exact amount an attorney will charge would be based on:
The two most prominent types of consumer bankruptcy are Chapter 13 and Chapter 7 bankruptcy. These two bankruptcy types have different costs attached to them. The Chapter 7 bankruptcy discharge is way less expensive than its alternative. Also, its primary focus is liquidation, and it gets rid of a great portion of a debtor’s unsecured debt. Examples of debts that can be eliminated with this method include credit card and medical debt, and you’re no longer obligated to pay them once you’ve eliminated them.
To qualify for a Chapter 7 bankruptcy discharge, then you’ll need to take a bankruptcy means test. The easiest way to get this bankruptcy discharge is to earn below a specified income limit that differs from your state, household size and income source.
Chapter 13 bankruptcy, on the other hand, is way more expensive. This type of bankruptcy is more fitting for those that need a reduction in their monthly debt payment and overall sum.
There are cheap ways to file for a Chapter 7 bankruptcy discharge. But first, the exact price differs from area to area, so it’s best to first check the cost estimate in your location. Secondly, you can inquire from an attorney about their bankruptcy fee. Be sure to clarify whether it includes a filing fee. Thirdly, ask if the attorney will agree to a payment plan. If your income is very low, then you should opt for legal aid and fee waivers. You can also file for bankruptcy without an attorney.
A good majority of people file for bankruptcy via an attorney. Thus, we’ll cover the cost of going through this route.
The chances are high that this will be your highest cost.
Based on thousands of reviews, an average amount spent on Chapter 7 bankruptcy attorney ranges between $500 to $3000. A chapter 7 business bankruptcy often costs from $2,000 to $5,000. The exact amount is dependent on a number of factors; this includes location, attorney’s expertise, and the difficulty of the case.
The filing fee is a fixed cost, but the bankruptcy attorney fee can often vary by state to state. Below are the sources where you can find information for the bankruptcy attorney and filing costs in your state.
Fortunately, a number of bankruptcy attorneys accept scheduled payments to help reduce the impact of the financial obligation (source). That said, many attorneys do not take credit cards payments from credit cards in your name to potentially avoid bankruptcy fraud.
Lastly, some attorneys give free bankruptcy consultations. You can schedule meetings with many Chapter 7 bankruptcy lawyers to find one you can afford and that offers a payment plan.
There’s no law mandating you to hire an attorney to assist with your Chapter 7 filing. However, there are many benefits to hiring a bankruptcy attorney. One such is that they’ll advise you on your option and legal right. Nevertheless, you can file for bankruptcy without the service of an attorney.
You’ll be mandated to make a fixed payment of $335 as a filing fee before your bankruptcy process can commence. You’ll also pay the Bankruptcy Trustee between $15 and $20.
However, you can apply to have this Chapter 7 bankruptcy cost removed. Getting this bankruptcy fee waiver is dependent on your income. And the only households that get this are those earning less than 150% of the official poverty line at the time of applying for a bankruptcy discharge.
If your household income requirement falls below the given value for getting a waiver, then you may request to make an installment payment. To do this, you should request a form to that effect and pay the filing fee in installments when agreed upon.
In an instance where a bankruptcy course approves your installment request, then you can make payment in up to four installments. However, you can’t receive your bankruptcy discharge before making your installment in full.
Consumer debtors must complete a credit counseling course before filing bankruptcy. The course must be completed within 180 days before filing the Chapter 7 bankruptcy petition. Courses are available online, in person, and by telephone. However, you must use a company that has been approved by the United States Trustee’s Office. In most cases, the course can be completed online in about 90 minutes to an hour.
On Average, most companies charge between $10 and $50 for the credit counseling course. You can shop around from the list of approved companies to find a company that has the lowest rate. All courses must contain the same basic information.
If you meet specific income requirements, the fee for the credit counseling course may be waived. Each company has a process for requesting a fee waiver.
You’re mandated to detail all your creditors on the bankruptcy forms given. It’s best to sieve through your credit reports to ensure that all collection agencies and creditors are added to the forms given.
You’re entitled to get free copies of your credit report every 12 months from all major credit reporting agencies. You may be charged an additional amount if you’re requesting your attorney to help with credit reports.
Once you’ve filed for the chapter 7 bankruptcy petition, it’s mandatory that you complete the second bankruptcy course, which is technically called the debtor education course. This debtor education course has to be done with the supervision of a company registered for that. Most of these companies do the courses online, via telephone, and in person. The bankruptcy court may deny your application if you don’t complete your debtor education course and submit your certificate of completion at the due date.
In the same manner with credit counseling courses, your debtor education course is often around $10 to $50. A good number of companies offer these courses at a discounted amount–provided the same company helped you with the two courses.
In some instances, you may get a fee waiver on a debtor education course, provided that your income falls below a specific amount. Discourse with your company on the procedure with which you can get a waiver.
Your miscellaneous costs help with unforeseen and petty costs that may pop up during your bankruptcy filing process. Take for example; you’re filing for your Chapter 7 bankruptcy discharge without hiring the service of an attorney; this means that you’ll have to pay for postage costs and copy costs when the need arises. It’s also possible that you incur some expenses like parking fees and travel expenses when you visit the court to physically submit your forms. And if you mail the forms, then you’ll incur postage costs.
It’s mandatory that you attend a minimum of one bankruptcy hearing. Your fee may vary here based on your location and the distance to the courthouse. Parking fees during your application hearing is also possible.
Before choosing to begin the bankruptcy filing process, it’s best to first carry out a detailed review of your financial predicament. You should also analyze alternatives including the chance that you may lose belongings. This will give you a better understanding of how things really are and if the alternatives are a more sensible option.
Also, consider that every situation has a distinct factor for companies and individuals to consider before choosing to file for bankruptcy or not.