How Much Does Bankruptcy Cost?
How much does it cost to file bankruptcy? Sadly, there is no easy answer. Though the expense of filing a petition to the court is fixed, what you’ll pay an attorney and how you’ll make the payments can vary widely, depending on who you hire, where you live and the complexity of your case.
Bankruptcy Filing Fees
Chapter 7 Total Filing Fees: $335
- Filing fee: $245
- Administrative fee: $75
- Trustee Surcharge: $15
- Re-opening a Chapter 7 filing: $260
Chapter 13 Total Filing Fees: $310
- Filing fee: $310
- Administrative fee: $75
- Re-opening a Chapter 7 filing: $235
Attorneys’ fees differ from case to case, judicial district to judicial district and state to state. Where you live can make a substantial difference in what you pay, but an even bigger factor is the complexity of your case. Like everyone, lawyers want to be paid for their time, and the more time your case takes to resolve, the more it will cost.
Average Attorney Fee for Chapter 7 Bankruptcy: $1072
An American Bankruptcy Institute study using data from 2005 to 2009 revealed that the average national average cost was $1,072 for Chapter 7 cases with assets. The cost depends on where the case is filed. Chapter 7 fees ranged from a low of $781 to a high of $1,530 in Arizona.
Average Attorney Fee for Chapter 13 Bankruptcy: $2564
The ABI study showed an average of $2564 for Chapter 13 cases, with ranges from from $1,560 in North Dakota to a high of $4,950 in Maine.
Myriad circumstances can add to the cost of a simple bankruptcy filing. Attorneys will charge more as the complexities grow, particularly if they require court appearances.
Factors that can add to fees include:
- Filing for a business bankruptcy as well as a personal one
- You have multiple sources of income
- You earn more than your state’s median income for the size of your household
- Having an extensive number of creditors
- Having filed for bankruptcy before in the past eight years
- Trying to stop another legal action such as a foreclosure filing against your property, an eviction, a bank levy or a repossession of property that served as loan collateral
- Accusations that you committed fraud, or the likelihood that such accusations might be made
- You have non-dischargeable debts such as student loans, child support, alimony or past-due taxes
Attorneys almost always demand payment before service in Chapter 7 cases. They will often offer payment plans, but they won’t proceed with your case until your fees are paid. That leaves you vulnerable to creditors trying to collect your debts while you try to raise money for the lawyer.
How to Find Bankruptcy Attorney Costs in Your Area?
Those are just averages, and fees have likely increased since the survey was conducted. In Chapter 13 cases, judges will review attorneys’ fees unless they fall below a so-called “no-look” amount, which is a baseline considered reasonable in the jurisdiction where the case is filed. But in general, it’s a good idea to call or meet with several attorneys before choosing one to represent you. Bankruptcy-attorney fees are public record and can be accessed through the searchable federal PACER website. Though PACER charges a small fee for downloaded information, it can be money well spent.
The cost of living where you file will also impact what you pay. Lawyers in large metropolitan areas, like everyone else, have bigger expenses than those in more rural settings. The higher cost tends to raise all professional costs, and bankruptcy representation is no exception. Also, not all lawyers were created equal. Those with many successful years in the bankruptcy field will almost certainly demand larger fees than those with little experience.
It is a good idea to consider the complexity of your case when picking a lawyer. If you have few assets and not many debts, your simple case might not demand the sort of representation that someone with a diverse source of income, a fat folder of creditors and perhaps a suspicion of fraud, might need. In other words, not all bankruptcies are the same. Remember that mulling the sort of lawyer you might need.
Those with complicated cases might benefit from an experienced bankruptcy lawyer. If creditors challenge your financial statements and allege fraud, having an attorney able to navigate a complex case would benefit you. The same would be true for cases springing from medical debt, a fairly common culprit in bankruptcy filings.
Bankruptcy Education Courses: $50
One small fee that you mustn’t forget covers credit counseling. Completion of two credit counseling courses is required for petitioners in both Chapter 7 and Chapter 13 cases. You must consult a nonprofit credit counseling agency to arrange to take the course. The Office of the U.S. Trustee, the federal agency that oversees the counseling requirement, sets reasonable fees for such courses at free to $50. The course can be taken in person or online.
How to Save Money on Bankruptcy Costs
Although everyone who files for bankruptcy protection has unmanageable debts, some applicants are worse off than others. Be sure to fully document your financial situation before consulting a bankruptcy attorney. If you are unemployed, a low-wage earner, disabled or elderly, you might be able to get a fee reduction.
Bankruptcy is a hard step to take, and recovering from it isn’t easy. Though a successful Chapter 7 petition will discharge your debts, it will remain on your credit report for as long as 10 years, affecting your ability to borrow. A Chapter 13 resolution might not be as damaging, but it will require that you stick to a repayment plan for three to five years, even if the court reduces your debts.
Given the consequences, discussing a disability or your advanced years with an attorney can help. Obviously, if there are impediments to rebuilding your finances after bankruptcy, that is relevant and an attorney might be willing to reduce fees to mitigate the damage bankruptcy is certain to cause.
In most instances, bankruptcy attorneys charge a flat fee, meaning they will tell you before starting work on your case what it will cost. In Chapter 7 cases, they’ll want the money up front; in Chapter 13, they often demand just a portion of the fee to start the case, and will take the remainder through the court-approved bankruptcy settlement plan.
If legal representation costs more than you can afford, you might consider representing yourself and either file the paperwork on your own or seek help from a bankruptcy petition preparer. Petition preparers, also known as typing services or paralegals, are non-lawyers who will generate the necessary court filings. Unlike lawyers, petition preparers can’t offer you legal advice, nor can they guide you in deciding which type of bankruptcy to file or what property and assets to include or exclude from your filing. They primarily offer a clerical service that leaves the decision making to you.
Since many legal forms are available online, petition preparers might have little to offer since they won’t guide you through the process or offer legal representation. If you don’t have internet access, they might be valuable, but you should understand their limitations before using their services.
Before deciding to handle your own bankruptcy without a lawyer, consider the consequences. The chances of running into trouble that might result in your case being dismissed are considerably greater if you don’t use an attorney.
How to Pay for Your Bankruptcy
Filing for bankruptcy will cost you even though you’re in no position to pay. Yes, in perhaps the ultimate Catch-22, you’ll need money to let your creditors know you don’t have any.
Though covering the cost of bankruptcy might not be the largest problem on your agenda, it is an issue. Most bankruptcy petitions require some form of legal help, and the more complicated the filing, the more help you’ll need. That means hiring a lawyer, and unless you know one who works for free, it will require money.
Legal fees are the biggest headache, but not the only one. You’ll also have to pay court costs and a fee for mandatory credit counseling. The combined bill could run into the thousands of dollars, so before you load up your briefcase and head for the courthouse, you need to know what you need to do, how much it will cost and where you’ll find the money.
If you’re unable to borrow enough money from family or friends to pay a lawyer, other options exist:
- File on your own, also called pro se. This reduces filing and administrative fees since you do the work yourself, but it can be very risky. If you fail to complete documents properly or on time, or if you face a creditor who questions your financial disclosures, you might find that you’re ill-equipped to handle your case.
- Obtain help from a free legal clinic or the Legal Aid Society. If your income is less than 150% of the poverty line for your family size and you can’t afford a plan to pay an attorney, you might qualify for pro bono legal representation.
- Find a bankruptcy lawyer who will work for you for free, known as pro bono representation. You can use the American Bankruptcy Institute’s attorney directory or consult your state’s bar association for lawyers who might take your case without charge. Some law firms require their attorneys to take 10% to 15% of their cases pro bono.
- File under Chapter 13 instead of Chapter 7. Since a Chapter 13 settlement is really an extended repayment plan, lawyers are much more willing to take your case if you can’t pay your fees up front.
- Use other tactics to raise the money. You should stop paying credit-card debts and apply the money to the attorney’s fee. Also consider taking a part-time job to earn the needed money or selling household items on Craigslist or eBay.
About The Author
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at firstname.lastname@example.org.
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