How Much Does Filing For Bankruptcy Cost – While there aren’t many financial conditions that sound as dire as bankruptcy, things aren’t all gloom and doom. For many people, declaring bankruptcy is a way out of the debt cycle. So what do you do when your income is no longer enough to cover your debts?
Bankruptcy as a financial instrument is for this. However, just because it’s designed for people who are in dire financial straits, that doesn’t mean filing for bankruptcy is free.
How Much Does Filing For Bankruptcy Cost
Well, it depends on several factors. First, there are six different types of bankruptcy, two of which are for individuals—Chapter 7 and Chapter 13. The two filing costs are different.
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Second, the question of whether you attempt to do it yourself or rely on a professional to guide you through the process is also a factor that affects the overall cost. And the cost of a bankruptcy attorney also depends on who you hire, where you live, and the complexity of your case.
We go through all of these factors and try to find an average bankruptcy cost so you know what to expect.
Generally speaking, Chapter 7 bankruptcy is the default bankruptcy option and most people use it as such. Nearly 65 percent of all bankruptcy cases filed are Chapter 7.
Chapter 7 bankruptcy governs the liquidation process under the bankruptcy laws of the United States. The first thing that sets it apart from Chapter 13 bankruptcy is that it is much faster. The main features of Chapter 7 bankruptcy are:
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Although most of the assets are confiscated, some of the assets are exempt from tax. For example, a primary residence, primary vehicle, 401(k) plan, furniture, and similar assets can be retained.
Chapter 13 bankruptcy is completely different from Chapter 7 because it is more of a reorganization process than a liquidation. Specifically, in a Chapter 13 bankruptcy, debtors can keep all of their assets, but they are required by law to pay unsecured creditors an amount equal to the value of all of their exempt assets.
Another big difference is that while Chapter 7 is available to both individuals and businesses, Chapter 13 is only for individuals (including sole traders).
Now that you know the difference between a Chapter 7 and a 13 bankruptcy, it’s time to figure out which one is right for you. It’s not just about the total costs of declaring bankruptcy, but other factors as well.
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The most significant benefit of Chapter 7 bankruptcy is that you can quickly get out of debt and get a fresh start. This usually takes 3-5 months. The downside is that you have no way to catch up on missed payments and avoid foreclosures.
And the biggest benefit of Chapter 13 bankruptcy is that you get to keep your assets. Still, you must make monthly payments to the trustee for up to five years.
Another thing worth noting is eligibility restrictions. In addition to worrying about average bankruptcy costs, you first need to find out if you qualify.
In other words, the choice you worry so much about may not even be available. So check this before making any decisions.
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The two have their own correlation because the state average attorney fees are not the same either. We will discuss this in detail a little later.
As we have mentioned, bankruptcy costs are relative and depend on many different factors. This is what the costs look like if you decide to file for bankruptcy yourself.
The Chapter 7 filing fee (just to get your case in court) is $338 in all states.
Even without a lawyer, you will need to get credit counseling, which will cost you about $50. This is a process that people with financial problems use even when they would not file for bankruptcy. It’s about better understanding their budgeting process, credit score, financial tools, etc.
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Additional fees, such as paying for a debt education course (also required when filing for bankruptcy), will cost you between $50 and $100.
Remember that even in situations where you cannot afford the fees, you can negotiate with the service provider to lower them slightly or even waive them.
Remember, with the Chapter 13 filing fee, you must also prove that you have disposable income. Your eligibility to receive a Chapter 13 filing fee depends on your ability to make those payments to the trustee.
In addition to this, it should be mentioned that other reporting costs (credit counseling, debt education courses, etc.) are also mandatory. In addition, when talking about average bankruptcy costs, we are usually talking about a figure to which all the additional costs of the process (applications, appeals, transfers of claims) have been added, not just notification costs.
The Cost Of A Bankruptcy Lawyer: Chapter 7 Vs. Chapter 13
One of the options that people often inquire about is filing for bankruptcy online. Barring some extreme circumstances, federal courts still do not allow this type of bankruptcy filing.
However, you can still find and research these forms online and gather all the information you need. We recommend that you do your research. You can even download a template form and fill it out before filing the old fashioned way.
When calculating the average costs of filing for bankruptcy, sometimes the lawyer’s fee must also be taken into account. There are many advantages to this approach, and seeking bankruptcy legal help is always a smart choice.
Remember that the lawyer’s fee is added on top of the bankruptcy fee (it is not included in the price). In other words, it’s $338/$313 (depending on the figure) plus attorney’s fees and other additional costs.
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The cost of Chapter 7 bankruptcy for those who choose the attorney-assisted route is between $500 and $3,500. The complexity of the matter is usually the deciding factor. Hiring a larger firm will cost more than choosing a sole practitioner, but there is also a scenario where large law firms offer lower costs in order to get a higher volume of cases. So it may be wise to shop around.
One of the issues you need to be aware of is that the lawyer will ask for a fee before you file. The reason for this is simple: a successful Chapter 7 case will eliminate all of your debts, including the money you owe to that attorney.
The cost to file for Chapter 13 with the help of an attorney is between $1,500 and $6,000. However, most people pay the $3,000 limit on average.
You have to keep in mind that the complexity of the case is again the main factor. For example, if you own a business, it takes a lot more work to deal with it. That is why the lawyer you hire will charge you more.
Chapter 7 Vs. Chapter 13 Bankruptcy
As we’ve already mentioned, the cost of filing for bankruptcy does not depend on the state you have listed as your primary residence. Chapter 7 always costs $338 and Chapter 13 costs $313. You can check it on the official website of the state bankruptcy courts.
Keep in mind that when discussing the average cost of bankruptcy in each of these states, there are other variables to consider. For example, average fees for attorneys vary from state to state. In addition, there are many additional costs and operating expenses such as:
The costs of bankruptcy proceedings are simply part of a larger problem. The biggest concern is not the cost per se, but your ability to pay for it. The fact that you are filing for bankruptcy means that your finances are not great. How To Get Out Of Debt When You Can’t Make Immediate Bankruptcy Payments?
Most people rely on a personal loan from someone they know. Of course, application fees are only about $300, but there are quite a few additional fees and expenses. As mentioned above, bankruptcy attorney fees can range from $500 to $6,000 depending on the figure and the broader concept.
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Another thing you can do is build up some cash by practicing a more rigorous lifestyle in the weeks before you file for bankruptcy. Use some debt relief tips and prioritize your bills. You can also try to earn extra income.
It is also possible to find lawyers who are willing to accept your case pro bono (for free). Still, even in that situation, you have to pay the application fee yourself.
During the process, you can ask the court to give you permission to pay these fees in installments. Just remember that there are two limitations here:
In a situation where your income is less than 150% of the federal poverty level, you may even be able to prove that you cannot pay the payment even in installments. This way you have a chance to get approval for the waiver.
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While some people sell their assets to cover the costs of filing for bankruptcy, in some cases this can cause additional damage. It may be a good idea to seek legal advice before proceeding further.
Chapter 7 bankruptcy cannot be discharged early. However,
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