What's the Average Cost Of Bankruptcy?

Understanding the range of bankruptcy prices you'll likely encounter in the marketplace will help prepare you (and your wallet) for when it's time to file—especially since bankruptcy prices vary depending on a variety of factors, including where you live and the experience of the attorney you hire. Even so, you can count on paying three types of fees: credit and debt counseling expenses, court costs, and attorneys' fees.

What Are the Costs of Bankruptcy

In both a Chapter 7 bankruptcy and a Chapter 13 bankruptcy, you can expect to pay three types of fees. Here's an explanation of each of the costs involved in a bankruptcy.

(If you'd like to know about the different bankruptcy chapters, start by reading Chapter 7 vs. Chapter 13 Bankruptcy.)

Credit Counseling and Debt Education Costs

All individuals who file for Chapter 7 or Chapter 13 bankruptcy must take two educational courses. On average, expect to pay approximately $50 for both classes.

• Credit counseling. Before you file a bankruptcy case, you're required to participate in a credit counseling session in which you and the provider will review your finances and determine whether filing for bankruptcy makes sense.
• Debtor education. After filing, you must complete the second course on financial management. You'll have to prove that you took the class by filing the completion certificate. If you fail to do so, you won't receive a bankruptcy discharge (the order that wipes out qualifying debt).

Providers charge as little as $5 to as much as $50 per session. Some might offer you a package deal if you purchase both when you sign up.

On average, each session will cost about $25 if taken online (phone sessions might be slightly higher). Also, if your household income is lower than 150% of the poverty line, you might qualify for a fee reduction or a fee waiver.

Finally, be aware that you must use an approved agency on the U.S. Trustee's list.

Bankruptcy Court Costs

It costs money to process your case. To offset it, you'll have to pay a filing fee unless you qualify for an alternative arrangement (more below). As of November 2017, the filing fee for a bankruptcy case was as follows:

• Chapter 7 — $335
• Chapter 11 — $1,717
• Chapter 12 — $275
• Chapter 13 — $310

People who can't afford to pay the fee in a lump sum can ask to pay in four installments over as long as 120 days. But, if you miss a payment, the court will dismiss your case. If you can't pay the fee at all, and your income is less than 150% of the poverty line, you can request that the court waive the fee altogether.

During the case, you might have to pay additional court costs, although it's unusual. Here are some other fees the court charges:

• converting (switching) a case from one chapter to another
• splitting a joint case between spouses into two separate cases
• filing an amendment (additional paperwork) adding a creditor
• filing a lawsuit (adversary proceeding) within the bankruptcy case, and
• reopening a closed case.

The amount of these fees will vary depending on the bankruptcy chapter and the person requesting the action. The Administrative Office of the U.S. Courts publishes the standard fee schedule on its website.

Average Bankruptcy Attorneys' Cost

Unlike court fees, there's no standard price for bankruptcy cases. Many factors can affect what you'll pay, including

• Location. Attorneys' fees vary widely. Expect to pay more for larger metropolitan areas than for smaller cities and rural areas.
• Case complexity. If you have a complicated matter, unique issues, require litigation, more creditors than average, a lot of nonexempt property (property you can't protect), or run a business, you might have to pay more in attorneys' fees.
• Type of case. A Chapter 13 case lasts longer (three to five years) and is more labor-intensive than a Chapter 7 case that lasts approximately four months.
• Size of the firm. Some firms charge less because they rely on paralegals rather than attorneys to do the bulk of the work.
• Reputation and experience of the attorney. Attorneys who've been awarded special certifications by a state bar association or by a national bankruptcy lawyer group might charge a higher fee.
• Number of filers. Some attorneys will charge a couple filing a joint case more than an individual filing for bankruptcy.

Average Cost of Bankruptcy in a Chapter 7 Case

In 2017, attorneys' fees for an uncomplicated Chapter 7 case ranged from $700 to $2,500 with a mid-range of about $1,500 to $1,700. Keep in mind that the lower the fee, the higher the likelihood that the attorney will charge for additional services like amending paperwork or reviewing reaffirmation agreements (an agreement to remain obligated for a debt, such as a car loan).

Also, if you find yourself involved in a lawsuit—for instance, a challenge over property or the dischargeability of debt—plan on paying an hourly fee for the litigation. The flat fee quoted by most bankruptcy attorneys won't include representing you in an adversary proceeding.

Average Cost of Bankruptcy in a Chapter 13 Case

In most jurisdictions, the court sets a reasonable fee for a Chapter 13 case ranging from about $3,000 to $4,000. An attorney who intends to charge more will ask the court to approve the higher fee.

In a Chapter 13 case, attorneys often require that you pay the court cost and a down payment of the attorneys' fee before filing the matter—but not the entire amount. The remaining balance can be paid over time as a part of the Chapter 13 plan payment.

Many things can happen over the course of a three- to five-year Chapter 13 case. After the terms of the repayment plan have been confirmed (approved), the court will usually allow attorneys to charge more for additional services, such as handling a:

• creditor's motion authorizing the collection of the amount owed
• trustee's motion to dismiss the case for failure to pay the monthly payment
• modification to the repayment plan (such as when income drops)
• motion to approve additional debt (for instance, if the filer needs a car)
• motion to approve a mortgage modification, or
• motion to dismiss the case or convert it to another chapter.

Talk With an Attorney

The simplest way to determine the average cost of bankruptcy in your area is to contact several bankruptcy attorneys. Many will provide an initial consultation at no charge.