How to File Chapter 7 With No Money

The oxymoron of bankruptcy is that a person deep in debt has 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 the credit counseling and debtor education courses the process requires, and hiring an attorney to guide you through the bankruptcy journey means additional expense.

Paying for a lawyer isn’t required, but when you can afford it, the help of an attorney is recommended in Chapter 7 bankruptcy, which is sometimes called “Liquidation Bankruptcy” because it can involve selling off – or liquidating – some of your assets to help repay the creditors to whom you owe money.

You’ll want to minimize the loss of your property, and an attorney’s guidance makes that easier.

That said, the stats indicate liquidation might not need to be a huge concern. According to Ed Flynn at the American Bankruptcy Institute, 93% of Chapter 7 bankruptcies filed in the last 10 years have been closed as no-asset cases, meaning without the loss of any of the filer’s property.

Still, a bankruptcy attorney can assist you in several important ways, including understanding which of your assets might be subject to liquidation, organizing the property the court might order you to liquidate, and filing the load of paperwork the court process requires.

In a Chapter 13 bankruptcy, which requires debts be settled on an established payment plan, a lawyer is almost essential.

Chapter 7, obviously, can be expensive, however, there are ways to avoid the costs of Chapter 7 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 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, which is 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?

Those fees can seem steep when you’re already in enough financial trouble to be considering bankruptcy. To be eligible for Chapter 7, you must either show that your average monthly income for the previous six months was less than the median income for a household of the same size in your state, or you must pass a means test proving that your disposable income isn’t enough to make even partial payments to your creditors.

Once you meet one of those standards, you might be able to file for free, with all bankruptcy filing fees waived.

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 afford to make installment payments on the fees. 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.

If helpful, use the free bankruptcy cost calculator below to estimate how much bankruptcy will cost you in your area.

How Much Does a Bankruptcy Attorney Cost?

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.

Typical fees nationwide for an attorney in Chapter 7 range between $1,000 and $3,500 based on factors such as where you live, the complexity of your case, the size of the law firm and the experience of the attorney. Most Chapter 7 bankruptcy attorneys will charge a flat fee to take your case rather than bill by the hour, so you should know up front how much your legal help will cost you. Often, attorney fees can be paid with an installment plan.

If helpful, use the free bankruptcy cost calculator below to estimate how much bankruptcy will cost you in your area.

How to Save Money by Filing for Chapter 7 Yourself

That $1,000-3,500 range for hiring a bankruptcy attorney … that’s big money no matter where your potential lawyer’s fee fits into it. So, the general rule on whether or not to pay it is this: The simpler the filing, the more likely you can do it on your own. There is risk. Mistakes may wind up costing you more than an attorney would. But it can be done.

Here are the stats, again from Ed Flynn at the American Bankruptcy Institute: 64.8% of Chapter 7 cases filed without an attorney and closed in 2024 resulted in a discharge of debts. So yes, there’s a great chance you can do it yourself if you can’t afford a lawyer. But for what it’s worth, Flynn says 96.9% of 2024 cases filed with attorneys were closed with debt discharges.

One important factor when pondering an attorney: The first visit to a bankruptcy lawyer typically is free. That is the consultation when you discuss your situation with the attorney, who offers advice and explanation on how he or she 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.

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.

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. And self-help books are available at all the typical bookstores and web sites.

Before you can file for bankruptcy, you’ll need to gather and organize your financial documents, complete the required credit counseling courses, and fill out approximately 20 forms to begin your petition.

If you choose to file bankruptcy without an attorney, here are additional steps and key information to be aware of:

• Get Your Case Information: Obtain a bankruptcy case number, the name of your bankruptcy trustee, and the appointment date, time, and location for a meeting with the trustee and your creditors. The court clerk will give you all that information when you initially submit your documents and pay the $338 court fee (unless you have a fee waiver) at the courthouse.
• Automatic Stay Begins: Know that an automatic stay protecting you from debt collectors kicks in as soon as you file those documents with the court clerk.
• Know the Trustee’s Role: He or she is a court-appointed official who oversees your case and makes decisions about what assets, if any, you might have to sell to pay your creditors. The trustee will need to be familiar with your case and your circumstances, and so likely will ask you to submit financial documents such as bank statements and pay stubs by mail.
• Attend the ‘341 Meeting’: This gives creditors an opportunity to question you about your financial situation. It sounds more intimidating than it usually is. In many if not most of these sessions, creditors either don’t show up at all or don’t have questions for you, and the trustee’s questions normally are for standard fact-and-identity verification purposes. These meetings generally are short and can be done via video conference. By the way, it’s called a ‘341 meeting’ only because it’s a step mandated by section 341 of the Bankruptcy Code.

Legal Assistance for Low-Income Debtors

Legal assistance 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.

Legal Bankruptcy Exemptions for Property

From the very beginning of Chapter 7 bankruptcy’s legal process, much of your personal property is protected. Both federal and state law exempts many assets from being sold to satisfy your debts. Why? To make it as easy as possible for the filer to get the fresh start promised by bankruptcy. Exemptions are the biggest reason for that statistic we mentioned earlier from the American Bankruptcy Institute: 93% of Chapter 7 bankruptcies filed in the last 10 years have been closed with no loss of the filer’s assets.

So, what can you protect? Most of what you own. Among other things, in most cases you can exempt your equity in your home, your car, the necessities of living (such as clothes, furniture, and kitchen ware), tools you use for work, retirement accounts, your life insurance, veterans and Social Security benefits, unemployment compensation, and alimony and child support. Depending on your state’s laws, you might also be able to protect possessions such as jewelry and musical instruments.

However, the protection of your property doesn’t happen automatically. You have to be pro-active about it. When you file your bankruptcy petition, you need to give the court a comprehensive list of everything you own on an official form called Schedule A/B: Property. Whatever you fail to include on that list can be considered non-exempt, and the trustee can sell it to help pay back your creditors.

There is a list of federal bankruptcy exemptions, but 31 of the 50 states insist you use their set of exemptions instead. In some locations, you’ll have a choice between the federal exemptions and your state’s exemptions. That’s one of the reasons you’ll be best served by familiarizing yourself with the procedures and laws of your local bankruptcy court before you start the Chapter 7 filing process, especially if you haven’t, or can’t, hire an attorney to help.

Bankruptcy should be considered the final option in your efforts to get relief from your debts because its scar stays on your credit report for 7-10 years. But when you reach that final option phase, the exemptions system is among the reasons Chapter 7 bankruptcy is a good answer for people with little or no income.

Here are some of the main benefits of Chapter 7 bankruptcy:

• You keep most, if not at all, of what you own.
• You usually are eligible to file for Chapter 7 even if you’re unemployed or receiving unemployment compensation.
• It usually only takes about four months to complete.
• Your Chapter 7 filing immediately stops your creditors from continuing to try to collect what you owe, keeps your wages from being garnished, and prohibits your landlord or mortgage company from taking eviction or foreclosure action against you.
• It eliminates unsecured debt such as credit cards, medical and utility bills, and overdue rent.

What If You Are Not Eligible for a Filing Fee Waiver?

You might pass the means test, yet still not qualify to have fees waived. If you don’t, 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.

Is Chapter 7 Bankruptcy Right for Me?

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 might 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 bankruptcy alternatives to addressing debt, and it’s wise to explore them before you file. A nonprofit agency that offers credit counseling can discuss debt management programs with you that could ease the debt burden. Examining those options before filing bankruptcy might help you avoid the significant negative mark bankruptcy has on your credit score.