Understanding Bankruptcy Filing Costs and Expenses

Understanding Bankruptcy Filing Costs and Expenses

Filing for bankruptcy may seem counterintuitive because of the associated costs, especially during financial hardship. However, bankruptcy is a legal process aimed at reducing or eliminating debt burdens. The total expense varies based on factors such as court fees, attorney charges, case complexity, and location. Court fees are fixed, but other costs fluctuate. Knowing the types of bankruptcy and the typical costs involved can help you prepare financially for the process.

There are two main types of bankruptcy filings: Chapter 7 and Chapter 13. The choice between them impacts the overall cost significantly, so understanding their differences is essential.

Chapter 7: Also called liquidation bankruptcy, this involves selling some assets to pay creditors. It's suitable for individuals without significant property or steady income.

Chapter 13: Known as reorganization bankruptcy, it allows you to keep your assets like your home and car, provided you follow a repayment plan over three to five years.

Filing and ancillary fees: Regardless of the chapter you choose, certain fees are mandatory to initiate your case:

Filing Fee: For Chapter 7, it’s $338; for Chapter 13, $313.

Credit Counseling Fee: Before filing, you must complete a credit counseling course, typically costing around $50, with some options as low as $15–$20.

Debt Education Course: Post-filing, a mandatory financial management course costs approximately $50 to $100, with sliding scale options for those with limited means.

Attorney Fees: Hiring a lawyer can raise costs. Fees vary based on case complexity, location, and bankruptcy type, ranging from $500 to $3,500 for Chapter 7 and $1,500 to $6,000 for Chapter 13. Courts often review fees exceeding certain thresholds to ensure fairness. Many attorneys offer free initial consultations, giving you an estimate before proceeding.