Understanding Bankruptcy Filing Costs and Procedures
Learn about the costs associated with filing for bankruptcy, including court fees, educational courses, and attorney charges. Understand the differences between Chapter 7 and Chapter 13 and what to expect financially when considering bankruptcy. This guide helps individuals prepare for the process and plan their budget accordingly.
Types of Bankruptcy
Bankruptcy comes in different forms, primarily categorized under various chapters. For individuals, the most common options are Chapter 7 and Chapter 13 filings.
Chapter 7
Often called liquidation bankruptcy, Chapter 7 involves selling certain assets to pay off creditors. It’s suitable for individuals with limited income and no significant property, helping them discharge debts quickly.
Chapter 13
Known as reorganization bankruptcy, Chapter 13 allows filers to retain their assets, including homes and vehicles, by proposing a repayment plan over three to five years. This option is ideal for those with a steady income capable of supporting installment payments.
Cost Breakdown for Filing
The court requires various fees before processing your case. These typically include:
Filing fee
As of 2021, filing fees are approximately $338 for Chapter 7 (including trustee surcharge) and $313 for Chapter 13. These are standard charges paid upfront to initiate the process.
Credit counseling fee
Credit counseling courses, mandated before filing, cost around $50—although waivers or reductions may be available depending on your financial situation. Several approved agencies provide these courses.
Debt education course
Post-filing, a debt management course is required, typically costing between $50 and $100, with options for free or discounted classes for those eligible.
Legal Assistance and Attorney Costs
While you can file alone, hiring an attorney is often recommended due to the complexity of bankruptcy laws. Attorneys assist in navigating legal procedures, which can prevent costly mistakes.
Attorney fees vary based on case complexity and regional rates. For Chapter 7 cases, costs usually range from $500 to $3,500. For Chapter 13 filings, fees are generally between $1,500 and $6,000. Despite these ranges, courts have established maximum thresholds, known as “no-look” levels, to prevent excessive charges for attorneys.
