The Costs of Filing for Bankruptcy

by Luke Homen

If you’re weighing the pros and cons of bankruptcy, you may be curious about the upfront costs that come with it. After all, if you’re unable to pay your debt, spending a significant sum of money to eliminate that debt may not fit within your budget. Although there are costs associated with bankruptcy, they are generally not as high as people expect.

In fact, bankruptcy is almost always a fraction of the cost of debt settlement or debt repayment! Additionally, there are ways to structure your payments or take advantage of other options in order to accommodate your budget. Keep reading to learn more about bankruptcy expenses and your next steps.

Attorney Fees in Bankruptcy

While you may be concerned about your financial stability as you approach bankruptcy, this is not an area where you should cut corners. Every legal matter is complicated and multifaceted in its own way, but few are as challenging as bankruptcy. The bankruptcy courts are stringent about their requirements, and failing to meet any of their requirements could result in your case being dismissed. An experienced bankruptcy lawyer can help you sail through this process with minimal stress and anxiety.

Fees vary for each type of bankruptcy. In general, Chapter 7 is much shorter and more streamlined, so fees are lower. Chapter 13, which lasts three to five years, requires more work and legal expertise, so expect to pay more for a Chapter 13 bankruptcy filing.

A number of factors may influence what you ultimately pay. Beyond the type of bankruptcy you choose, the complexity of your case, your specific financial issues, and any additional services you may need (such as avoiding a judgment lien recorded against your home) will likely lead to higher expenses.

Bankruptcy Court Filing Fees

There are mandatory filing fees associated with filing for bankruptcy. Filing fees are generally similar for Chapter 7 and Chapter 13 filings, but it’s important to check with your attorney about current filing fees. The court does update them from time to time.  In general, you can expect the court filing fee to cost approximately $350.

If you’re concerned about being able to afford the filing fee, you have options. Form 103A, Application for Individuals to Pay the Filing Fee in Installments, allows you to request to pay your filing fee in up to four installments in the 120 days after filing. If you cannot afford this option, the court may waive your fees if your income is below 150% of the poverty line.

However, the court reviews these applications with extreme scrutiny, and it is extremely rare for a fee waiver to be granted by a bankruptcy judge.

Credit Counseling and Financial Management Courses

Although you do have to pay for bankruptcy counseling before and after your bankruptcy, these courses are generally inexpensive. Most approved course providers charge between $30 and $50 for each course, amounting to $60 to $100 for both your pre-filing course and your post-bankruptcy course.

Some bankruptcy law firms, including Convenient Bankruptcy, are able to pay these costs for you as part of your representation, and connect you with the best possible credit counseling service.  Since you need to take the classes, you should take the best ones that are available!

Other Costs Related to Bankruptcy

The bankruptcy trustee does a significant amount of work for each case assigned to them.  In a Chapter 7 bankruptcy, the trustee is paid $60 out of your court filing fee.  In a Chapter 13 case, the trustee is paid a small percentage of your monthly Plan payment, as set by the local United States Trustee. Note that these costs are rolled into your existing payments; they should not require you to pay anything out of pocket.

Document preparation fees, postage, credit report fees, legal research expenses, and notary fees are all smaller expenses that may pop up from time to time during your bankruptcy case.  You should ask your attorney whether the price they quote you is “all inclusive,” or whether there are additional fees to beware of.

Considerations for Affordability

It’s normal to worry about affording the fees and other expenses that come with bankruptcy. If you’re struggling to make your payments from month to month, the thought of coming up with a lump sum may seem impossible. Don’t panic, though; many bankruptcy attorneys offer payment plans to help those who do not have the money available upfront.

Pro Bono and Low-Cost Legal Services

For those who cannot afford to pay for their attorney services in part or in full, pro bono and sliding scale payment plans could be the solution. You can look into local Legal Aid associations or organizations to see if they can point you in the right direction. Some attorneys, particularly in this area of law, charge fees based on income to make their services more accessible.

Note that there are limitations for legal aid. There is only so much pro bono aid available, and these attorneys may have long waiting lists. Additionally, you may have to provide extensive documentation of your need for this assistance.

Potential Savings and Benefits of Bankruptcy

While you may worry about the costs of bankruptcy, don’t forget about the ways in which bankruptcy can help you save money. Having your debt discharged can bring you enormous financial relief. You’ll have an immediate stop to monthly payments and enjoy the increased cash flow that comes with that. Additionally, you’ll no longer have to worry about racking up fees and interest on your debt and late payments.

If you’re ready to find out if bankruptcy is the right choice for your financial stability, the team at Convenient Bankruptcy is ready to meet with you. Give our bankruptcy team a call at 405-639-0069 or request a consultation online.