So, you’ve made the decision to file bankruptcy and get relief from the stress of overwhelming debt and creditor harassment. Complete financial freedom, right? Well…..close. Remember, you still have to figure out how to pay for your bankruptcy and make sure you aren’t paying any unnecessary costs. The last thing you want to worry more about during this time is money, so the following is a general guide to help you figure out how much you should be paying.
The US Bankruptcy Court charges some fees associated with a bankruptcy case. These fees are not to be confused with attorney fees. The Court charges these fees to pay the administrative costs they incur when your case is filed. First and foremost, there is the fee to file the case. This fee differs depending on what Chapter of bankruptcy you plan to file. The filing fee for Chapter 7 bankruptcy is currently $335, while the filing fee for Chapter 13 is $310. Under some circumstances the court will allow an installment payment plan for the filing fee if necessary, but you usually have to apply so it is not guaranteed. Other common fees include a fee to add creditors after filing ($30), a fee to convert your case from one Chapter to another ($25), and a fee to reopen your case ($245 in Chapter 7 and $235 in Chapter 13). With the exception of the filing fee, the majority of the fees can be avoided by diligence. If you pay close attention when you file your case to make sure all of your creditors are listed, make sure to attend your 341 court date, and complete your mandatory financial management class, you will not likely have additional Court fees to pay as those three mistakes account for majority of extra Court fees.
For a complete list of Court fees visit: http://www.uscourts.gov/services-forms/fees/bankruptcy-court-miscellaneous-fee-schedule
Chapter 7 Attorney Fees
The amount you will pay an attorney for filing Chapter 7 varies depending on where you live and the complexity of your case. The general cost is usually between $1000 to $2000 for a standard case. “Standard” cases are cases where the person filing only has one source of income and has little or no assets. For a non standard case, i.e. you own several properties or own a business, the costs will generally increase. For instance, a client who owns 12 income properties and runs 3 different businesses has a very complicated case, so the law firm is likely to charge a much higher fee.
All of the attorney fees in a Chapter 7 are paid directly to the attorney. The majority of attorneys will allow you to pay their fee with a payment plan. Upon your first payment, or “retainer”, the attorney will generally open your file and provide certain services, such as assistance with creditor harassment issues. Usually, however, your case will not be filed until the full attorney fee is paid up front, so be sure you are clear on your timeline before making your first downpayment.
Chapter 13 Attorney Fees
Chapter 13 attorney fees also vary, but are more so dependant on your location than on the complexity of your case. This is because each jurisdiction has a standard “no look” fee that their Courts have approved. These “no look” fees vary drastically across the country from $2200 through $5500 depending on the jurisdiction. If a case is particularly complex, an attorney can petition the court for more than the “no look” fee, however, the majority of the cases use the standard fee for that jurisdiction.
In Chapter 13, attorneys will usually accept a down payment to get the case filed, and then roll the rest of their fees into the Chapter 13 Plan payment. This means that the attorney will get the remainder of the fee through the monthly payments you are making to the Trustee. This allows you to focus on making one payment per month instead of having two separate payment plans.
On top of the court filing costs and attorney fees, you may also encounter miscellaneous fees in order to get your case filed. One main fee is for a credit counseling briefing which you must receive in order to be eligible to file a bankruptcy. There are several credit counseling companies out there, but the fee is usually in the $30-$50 range. Another fee to keep in mind is the fee to pull a credit report. Even if you have all of your bills, pulling a credit report prior to filing is a good idea to ensure all of your creditors are listed on your petition. Credit reports usually cost about $50, but you may be able to get one for free through a number of online sites such as www.annualcreditreport.com. If you own real estate, you may also be required to get property comparables or in certain circumstances an appraisal. While property comparables are relatively inexpensive (about $20) and usually suffice, appraisals can be up to $500. Be sure to ask your attorney if any of these miscellaneous fees will apply to your case, so that you can be prepared.
All in all, while the fees may seem steep, the main thing to keep in mind is that once they are paid you are on your way to financial freedom. The majority of these costs can be paid through payment plans so you can pay a little at a time, or whatever works for you. At the end of the day, what is most important is to find an attorney who will provide a great quality experience and take you through the process with ease. Skimping to save a couple hundred dollars, even when you are struggling for money, can have catastrophic effects if you end up hiring the wrong lawyer just to save a few bucks.