If you are making the difficult decision to file bankruptcy, chances are your financial health is already suffering. You are likely concerned about the fees involved with filing and whether or not legal guidance is worth the additional cost. Although no two bankruptcies are the same, there are options for individuals with financial challenges. Read on for information about bankruptcy fees and costs, when you must pay them, and how to qualify for reduced fees or installments.
There are different fees for different kinds of bankruptcy. You should start by referencing the Department of Justice Bankruptcy Information Sheet to determine what kind of bankruptcy you will need to file.
Effective December 1, 2016, the fees to file a bankruptcy petition are as follows:
- Chapter 7: $335
Liquidation under the bankruptcy law in which a debtor’s assets are sold, creditors are paid, and debtor is freed from debts.
- Chapter 11: $1,717
Debtor-proposed reorganization of debt to keep business alive and pay creditors over time.
- Chapter 12: $275
Adjustment of debts for financially distressed family farmer or fisherman to carry out plan to repay all or part of their debts.
- Chapter 13: $310
Adjustment of debt for an individual with regular income to keep property and pay debts over a three- to five-year period.
The above fees are generally due when you file your bankruptcy petition, however, you may qualify for a fee waiver if:
- you are unable to make installment payments, and
- your income is below 150 percent of the official poverty guideline for the size of your household.
If you do not qualify for a fee waiver, you may still be eligible to pay your fee through an installment plan. If approved, your payment schedule will consist of four or fewer payments and the entire amount will be due within 120 days of your filing date.
Attorney fees and other costs
Beyond the filing fee, you may incur additional expenses. These include, but are not limited to:
- Credit counseling through an agency approved by the United States Trustee Program (USTP): Up to $30 (can be waived by the agency if you cannot afford to pay)
- Debtor education courses through a USTP-approved provider: Up to $35 (can be waived by the provider if you cannot afford to pay)
- Bankruptcy attorney: This amount varies widely. The average total cost for a Chapter 7 bankruptcy is $1,450 (inclusive of $335 filing fee, credit counseling, and other associated fees). However, some individuals pay $500 or less and others pay more than $5,000.
The cost of your bankruptcy is largely dependent on your unique financial situation, the type of bankruptcy you are filing, and the complexity of your case. For example, if you have a high income, retirement accounts, equity in your home, and you own a business, your bankruptcy will be more complicated than that of a single, low-income individual with no assets.
Is bankruptcy right for you?
According to Willa Williams, an accredited financial counselor at Trinity Financial Coaching, it is important to consider your options before diving into bankruptcy.
"Although filing bankruptcy can be beneficial to some, it is not the financial remedy for everyone," says Williams. "Whether or not to file is very personal and individual and should not be done without proper due diligence.”
Do you need a bankruptcy lawyer?
Williams says that if you do decide to file, attorney fees can cost several thousand dollars, but that an experienced attorney is essential to a favorable outcome. "If you file you should use a professional bankruptcy attorney to help you navigate the process," she says. "It is not recommended to try to do it on your own."
Further, it’s important to keep in mind that not all debt is treated in the same way. Secured and unsecured debts are handled differently, for example. And certain types of debt cannot be discharged through bankruptcy, like student loans.
"How a house and car are handled in the process may be different from how credit card debt or personal loans are handled," says Williams.
Most bankruptcy lawyers offer a free initial consultation. Take advantage of this offer and take time to interview several attorneys.
The decision to file bankruptcy is rarely an easy one. Hiring the right attorney can ensure that the process is as smooth and efficient as possible so that you can get on with your life and start rebuilding your financial future today.