Filing Chapter 7 With No Money
The oxymoron of bankruptcy is that a person in significant debt has to find money to pay for the way to get out of debt. Government thinking, no?
Yes, Chapter 7 bankruptcy can give you a fresh start, but obviously there are hurdles to clear and challenges to meet in doing so. Bankruptcy courts charge fees for filing and for required courses. If you need an attorney to guide you on the path – and it’s highly recommended – that is additional expense. If you file Chapter 13 bankruptcy, which requires debts be settled on an established payment plan, a lawyer is almost essential.
However, Chapter7 costs can be waived if you are in need or lack the income to pay. A low cost Chapter 7 filing is possible, and there are legitimate solutions when trying to learn how to file Chapter 7 with no money.
How Much Does Chapter 7 Bankruptcy Cost?
If you don’t hire an attorney, the total cost for filing Chapter 7 is $338, broken down this way:
- $245 filing fee, the cost for the court to handle your paperwork and case after you take it to the bankruptcy court and file it in person.
- $78 administrative fee. Somebody has to pay the clerks and other court employees.
- $15 trustee surcharge. It’s the government, right?
The good news: Those who qualify may file for free, with all bankruptcy filing fees waived. The bad news: Qualifying means not only are you in debt, your income is really low.
Those whose household income is less than 150% of the federal poverty level qualify to have fees waived. To become eligible for the fee waiver, you must file Form 103B – Application to Have the Chapter 7 Filing Fee Waived – and it’s wise to include it when you file bankruptcy. This form requires you to certify your income, and that you cannot even afford to make installment payments. Filing the form along with your bankruptcy filing takes care of everything at once.
Fees for the two required courses – one before filing on pre-bankruptcy credit counseling and the other, after filing, focused on financial management – are not high. The courses are run by agencies outside the court, many of which are nonprofit; typically the cost for both should never be more than $50. But if you can’t afford even that, you can ask the agency or organization for a waiver of the fees.
The biggest expense in filing comes if you use an attorney. The debate about using an attorney is a strong one, and while most people involved with bankruptcy – the courts, trustees, attorneys themselves – believe it is wise to have one, you could consider filing on your own, otherwise called pro se.
The average cost for an attorney in Chapter 7 is $1,450, according to Lawyer.com. Typical fees nationwide range between $1,000 and $3,500.
One important factor when pondering an attorney: The first visit to a bankruptcy lawyers typically is free. That is the consultation, when you discuss your situation with the attorney, who offers advice and explanation in how he can help. At the least, it’s wise to go through this free consultation to see where you stand. A reputable attorney with integrity may even explain honestly to you that your case is simple enough to file on your own.
Filing Chapter 7 Bankruptcy without a Bankruptcy Attorney
The general rule on whether or not to use an attorney is this: The simpler the filing, the more likely you can do it on your own and save the bankruptcy attorney fees. There is risk. Mistakes may wind up costing you more than an attorney would. But, it can be done.
Forms are available online via the U.S. court web site. Various financial web sites provide tools to help you go through the process of filing. Self-help books are available at all the typical bookstores and web sites.
You may fairly ask: What is a “simple” bankruptcy. The answer: If you have no property other than your home and you can wipe out most of your debt, you have a “simple” bankruptcy. Be prepared to study the procedures and the laws in your local bankruptcy court. Knowledge is always power, so when filing bankruptcy it’s wise to inform yourself before filing on your own.
Legal Assistance for Low Income Debtors
Legal advice for those in low-income situations comes in many forms. Keep in mind there are many ways to address the cost of bankruptcy. A tax refund could be applied to attorney fees. One could stop paying unsecured debts and use that money for an attorney and ask the debt be addressed in bankruptcy. Property that isn’t exempt from bankruptcy could be sold; think jewelry, the antique furniture or painting passed down by your uncle, a car that isn’t necessary.
In addition, legal help is available to those in need, though the availability varies by location. Some bankruptcy courts have free clinics to help people file on their own. Legal aid groups and pro bono attorneys will work for free. Call the local Legal Aid Society in your area, the state bar or check the web site for the local bankruptcy court to find information.
Not Eligible for a Filing Fee Waiver?
The required means test assesses your income to see if it is less than the median in your state for your household size. If it is, you qualify for Chapter 7 bankruptcy and possible debt relief. However, you may pass the means test, yet still not qualify to have fees waived.
If you don’t qualify to have the fee waived, you could ask the court to spread out the cost in as many as four installment payments. That means filing Form 103A, Application to Pay the Filing Fee in Installments. Typically a down payment on the fees also is paid when the application is filed.
Filing matters if you are having wages garnished to pay your debts, something that is not in the least enjoyable. Filing for bankruptcy, placing the down payment and applying for a payment plan will put an automatic stay on the ability of debtors to garnish your wages, which will help you pay those fees.
If you are approved for this approach, do not play around with the payments; make sure they are filed on time and as agreed to.
Summary & Alternatives to Chapter 7
If you reach the last resort of filing bankruptcy, there are ways to avoid the fees and file for free.
Chapter 7 bankruptcy is designed to discharge debt and give you a faster fresh start. You may have to sell some nonexempt assets to pay as much of the debt as you can, but filers keep their homes in 90% of all consumer bankruptcy cases. Chapter 13 requires a payment plan to address the debt. Because debt is addressed over time, filers can keep their home and other important assets.
Only with Chapter 7 can you seek a waiver on filing fees.
Though you have the option to file Chapter 7 and to do it yourself, there are ways to address debt prior to filing bankruptcy. A nonprofit agency that offers credit counseling could discuss debt management programs that could ease the debt burden. Examining those options before filing bankruptcy, could help you avoid the significant negative mark bankruptcy has on your credit score.
About The Author
Max Fay has been writing about personal finance for Debt.org for the past five years. His expertise is in student loans, credit cards and mortgages. Max inherited a genetic predisposition to being tight with his money and free with financial advice. He was published in every major newspaper in Florida while working his way through Florida State University. He can be reached at [email protected].
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