Going for Broke: How Much Does it Cost to File Bankruptcy?
Are you facing severe financial distress? You’re not alone!
From 2005 to 2017, nearly 13 million Americans filed for bankruptcy. There’s no doubt that bankruptcy is associated with a variety of emotional consequences. That said, it may be a necessary decision for you and your family to get back on track.
While it may seem counterintuitive, even bankruptcy requires money. Are you wondering how much does it cost to file bankruptcy? We have your answers.
Let’s get to them!
Understanding How Bankruptcy Works
Bankruptcy provides a viable solution for individuals struggling with unpaid debt. These debts may range from medical bills too high credit card balances to other issues related to unemployment or divorce.
That said, you should consider bankruptcy only as a last resort. While it provides financial relief, it isn’t a quick fix — individuals who file bankruptcy face a tremendous credit hit.
For several years, creditors will deem you as high-risk. This high-risk status will make it highly challenging (if not impossible) to secure new lines of credit. Thus, you may be stuck with credit cards or loans reserved for applicants with poor credit (which often results in higher interest fees).
Chapter 7 bankruptcies remain on a credit report for ten years. Additionally, they show up on all credit pulls and background checks. Chapter 13 bankruptcies last for seven years after the bankruptcy has cleared.
Chapter 7 Bankruptcy
This is the most common type of personal bankruptcy. Chapter 7 relieves individuals of most types of unsecured personal debts including:
- personal loans
- credit card charges and debts
- medical bills
- past lease agreements or utility bills
- various legal and attorney fees
Chapter 7 bankruptcy entails collective filing fees and attorney fees. Your lawyer will help assist you in navigating the legal issues throughout this process.
Chapter 13 Bankruptcy
Unlike Chapter 7 bankruptcy, Chapter 13 does not entail debt liquidation. Instead, this type of bankruptcy intends supports individuals with a steady income to develop a reasonable plan to repay their debts.
Some people may need to file for this bankruptcy if they do not qualify for Chapter 7. Others opt for Chapter 13, as it allows them to retain important assets (like their home).
Repayment plans vary depending on the individual’s financial situation, but most individuals follow a 3-5 year plan. They cannot currently exceed over five years.
How Much Does It Cost To File Bankruptcy?
When filing bankruptcy, you’ll be faced with two, major expenses: your attorney fees and your court filing fees. The attorney helps with filing your petition and also represents you in court.
While attorney fees vary on the firm and your location, filing fees cost the same nationwide. For Chapter 7, they are $335, and for Chapter 13, they are $310. Attorney fees can range between a few hundred to several thousand dollars.
Paying For Bankruptcy
If you’re filing Chapter 7 bankruptcy, the thought of paying for an attorney may seem both impossible and laughable. However, there are a few options to consider.
Negotiating a Payment Plan
Some attorneys will collaborate with their clients to design a reasonable payment plan. Of course, these plans vary depending on the attorney and your individual financial situation.
Some attorneys allow monthly payments spread over several months. However, most will want the full payments completed before the case is filed. That’s because you won’t be required to pay the attorney once the bankruptcy clears.
Of course, you can raise funds to pay for your bankruptcy. This strategy requires some hard work and creativity, but it’s the best choice for taking care of matters quickly and efficiently.
Try and earn additional income. Take on a part-time side hustle and consider selling used items. Do whatever you can to secure the funds.
Free or Discounted Help
In extreme cases, some people will benefit for free or subsidized legal support. This is typically reserved for individuals earning an income of less than 150% of the current poverty line. Some attorneys provide pro bono (free) legal services to help this population.
Finding An Attorney
Securing a competent attorney is one of the most essential steps in providing peace of mind for your current situation. That said, it isn’t always easy to parse out the excellent professionals from the masses.
Start by making sure that your attorney has the appropriate experience and practice areas. After all, if you are considering filing for bankruptcy, you want someone who specializes in bankruptcy law.
You may want to consider starting by obtaining referrals from friends and family. Go online and check local directories and read through online reviews.
You should then explore each attorney’s website. You want someone that provides information about bankruptcy, and you want to learn more about the professionals working for the firm.
Make an appointment with the potential candidates. Many attorneys offer free consultations. Even if you don’t live close to the firm, you may be able to arrange a phone or virtual meeting.
During the initial appointment, ask questions! What kind of pricing should you expect? Is it hourly or flat-rate? Do they have any statistics about their success rates?
Finally, what is their current availability? Who will be your point of contact assisting you throughout your case? What kind of timeline should you expect?
How much does it cost to file bankruptcy? As you can see, it depends on several variables ranging from the type of bankruptcy filing to differing attorney fees.
At Kinnard & Scott, we specialize in providing superior legal support. Whether you’re interested in learning more information about bankruptcy or you’re ready to file, we have you covered. Contact us today for a consultation.