When you're struggling with money issues, filing for bankruptcy can be a solution for your troubles—but you'll likely want to know how much it will cost. In this article, you'll learn about the three expenses you should plan to pay when filing for Chapter 7 bankruptcy.
Some people can reduce their costs by preparing their own case, but it takes significant research and preparation to avoid common pitfalls. In most cases, the fees spent for professional help are well worth the money:
Most bankruptcy lawyers charge a flat fee to represent an individual from the pre-bankruptcy stage of gathering data and producing the paperwork through the court's issuance of the discharge (the order that forgives debt). On average, for an uncomplicated case, the attorney will charge a fee of $700 to $2,500 with a mid-range of about $1,500 to $1,700.
Of course, every situation is different, and your case might warrant a higher fee. Here are a few reasons why that might happen:
In some jurisdictions, a Chapter 7 attorney might offer you a menu of services from which to choose. For instance, you can agree to pay the attorney to help you get the case on file, but handle the meeting of creditors and reaffirmation agreements on your own. Unbundling legal services can work for you if you have some knowledge of how Chapter 7 works and the confidence to carry out some of the responsibilities on your own.
You'll need to pay an administration fee to the court when you file your case. The current cost to file a Chapter 7 bankruptcy case is $335 nationwide (as of November 2017).
You can file a request to pay that fee in four installments over as long as 120 days, but be careful not to miss a payment. The court could dismiss your case without warning. In some jurisdictions, the court will not approve your request to pay in installments if you've paid an attorney a fee to help you with the bankruptcy. If you don't have the funds to pay the fee in installments, you can also ask the court for a fee waiver.
During the case, you might have to take some action for which the court will charge an additional fee. For instance, you could decide to convert (transfer) from Chapter 7 to Chapter 13 bankruptcy, or you might need to add creditors to your case. You can view the standard fee schedule on the U.S. Court website.
Before filing a Chapter 7 case, every individual debtor has to participate in a session with a credit counseling agency. Most programs offer an online session, but if you prefer access by phone, some qualified agencies provide that service as well.
After you file your case, you will take a second financial management course. You can use the same agency that provided your pre-filing credit counseling. Be aware that if you wait too long to complete the course, the court will close your case without a discharge, and you'll have to repay your filing fee to have the case reopened just to file your course certificate of completion.
Providers charge anywhere between $5 and $50 per session with the average session running about $25. If your household income is less than 150% of the federal poverty line, you might be able to waive the fee or pay a reduced amount. The agency makes that determination.
To find an agency approved in your jurisdiction, visit the website of the U.S. Trustee.