Published in: Banks | Oct. 19, 2019
How Much Does It Cost to File for Bankruptcy?
By: Lyle Daly
Declaring bankruptcy could cost you almost $4,000.
Given that bankruptcy is a declaration you can't repay your debts, you might think that the filing process is inexpensive or perhaps even free. That couldn't be further from the truth.
As ironic as it may seem, it can cost hundreds and possibly thousands of dollars to file for bankruptcy. To ensure that you can file without any issues, you'll need to be aware of all the fees and other expenses first, along with how you may be able to avoid them.
What are the costs of filing for bankruptcy?
There are two costs that are required with every bankruptcy:
- Filing fees
- Course fees for two courses you must take during the bankruptcy process
An additional potential cost is a bankruptcy attorney. You don't need to hire an attorney to file for bankruptcy, but it will give you much better odds of filing successfully.
Let's take a closer look at each of these costs so you know how they work and approximately how much they'll be.
How much are the filing fees for Chapter 7 and Chapter 13 bankruptcies?
When you go to the courthouse to file your bankruptcy paperwork, you must pay filing fees. The fee amount will depend on what type of bankruptcy you've chosen. Here are the fee amounts for the two types of bankruptcy that any consumer can file:
- $335 for Chapter 7 bankruptcy, which is when you liquidate property and discharge your debts.
- $310 for Chapter 13 bankruptcy, which is when you set up a three to five year payment plan to repay at least a portion of your debts.
Some consumers end up switching from one type of bankruptcy to the other. This typically occurs when consumers file for Chapter 7 bankruptcy, but can't pass the means test because their income is too high. In that case, there's no fee to change to a Chapter 13 bankruptcy.
However, if you need to switch from a Chapter 13 to a Chapter 7 bankruptcy (which would most likely occur if you aren't keeping up with your payment plan), then you'd need to pay the $25 difference in the filing fees.
If you're filing a Chapter 7 bankruptcy, you can apply for either a fee waiver or an installment plan (learn how below in "How to get fee waivers when filing bankruptcy"). Fee waivers aren't offered when filing Chapter 13 bankruptcy, with the logic being that if you can't pay your filing fee, then you won't have enough disposable income to handle a payment plan.
How much are the required courses for bankruptcy?
When filing for bankruptcy, there's going to be some homework involved. You're required to take two courses: a credit counseling course and a debtor education course.
You must take the credit counseling course before you file, and this will focus on evaluating your financial situation so you can decide whether bankruptcy is the best choice. After you file, you take the debtor education course, which will teach you about making good financial decisions.
Each course costs anywhere from $20 to $50, depending on the provider, and the U.S. Department of Justice has an online tool to find approved providers. Courses are available online or by phone.
Like the filing fees, you can receive fee waivers for each of these courses and I've explained how to do this later on.
How much does a bankruptcy attorney charge?
Easily the most expensive bankruptcy cost is hiring an attorney. Although you can file on your own, which is known as filing pro se, an attorney gives you a much better chance of a successful bankruptcy petition.
The cost of an attorney will largely depend on the following factors: where you live, the experience level of the attorney, and the complexity of your case. Attorney fees are generally between $1,000 and $1,500 for Chapter 7 bankruptcy. For Chapter 13 bankruptcy, attorney fees typically start at between $2,500 and $3,500, but can go up by $500 or more if there are any complications.
Numbers like those probably make you want to handle your bankruptcy on your own, but unfortunately, your chances of success will be slim. Ed Flynn, a consultant at the American Bankruptcy Institute, analyzed hundreds of thousands of bankruptcy cases from 2010 to 2016. Here's the data comparing bankruptcy success rates with pro se filings versus filings with a lawyer:
- Chapter 7 -- Pro se filings result in debt being discharged 6.1% of the time, compared to a 92.8% success rate for all filings.
- Chapter 13 -- Pro se filings result in a completed payment plan 0.5% of the time, compared to a 39.1% success rate for all filings.
Common reasons why courts dismiss bankruptcy applications include mistakes on the paperwork, not submitting all the required documentation, dishonesty about the applicant's financial situation, failing the means test (in the case of Chapter 7 bankruptcy), and problems with the proposed payment plan (in the case of Chapter 13 bankruptcy).
If your case is dismissed without prejudice, you're in the same position as you were before you started. You can refile as soon as you want, but you will need to complete the paperwork again and pay another filing fee. A dismissal with prejudice could bar you from discharging your debts, but this type of dismissal only happens if you commit some sort of fraud or abuse of the system.
The potential time and cost of having to refile means it makes sense to do everything correctly with the help of a lawyer in the first place. The only exception is if you're filing a routine Chapter 7 bankruptcy without any potential complications. Routine in this case means that your income is below the median in your state, you don't have too much property to deal with, and it's doubtful that your creditors will dispute anything.
In all other circumstances, you're better off getting a lawyer. It's almost a necessity for a Chapter 13 bankruptcy, but fortunately, you can at least request for your attorney fees be a part of your payment plan.
How to get fee waivers when filing bankruptcy
It wouldn't make much sense for it to be impossible to declare bankruptcy just because you can't pay for it. For that reason, you can apply for fee waivers for Chapter 7 bankruptcy filing fees and for the two required courses you must take.
Fee waivers are only an option if your income is below 150% of the federal poverty guidelines for your family size and the state where you live.
If you qualify for fee waivers, here's how you can apply for them with your filing and course fees.
How to waive Chapter 7 filing fees
Download and fill out the application to have the Chapter 7 filing fee waived. Submit this form to the court when you file for bankruptcy. If it's approved, you can file without paying any fees. If the court decides you don't qualify because of your income, then you can file to pay your fees in installments.
How to waive credit counseling and debtor education course fees
Check the course provider's website or call them to ask about how you can get a fee waiver.
The standard process will be to send your course provider income verification, usually via email. You can send your prior year's tax return or, if you don't have that, you can ask what other documents the provider can use to verify your income.
What if you can't afford a bankruptcy attorney?
If you need a bankruptcy attorney but you don't have the money to hire one, there are a few ways you can get legal help at low or no cost:
- Work with a legal aid society or free legal clinic that can help you file bankruptcy. To find one, use the Legal Services Corporation's online search tool.
- Find a lawyer willing to work pro bono, meaning at no charge. The American Bar Association has a Pro Bono Resource Directory with organizations offering these services in every state.
- With a Chapter 13 bankruptcy, you may be able to include all or a portion of your attorney's fees in your payment plan.
There is also the option to handle everything on your own, but as explained above, that's rarely a wise decision.
Should you stop paying your bills before filing bankruptcy?
One way to save money and prepare for bankruptcy costs is by not paying some of your bills once you're sure that you'll be filing for bankruptcy. This is absolutely a smart financial move, but you need to know which bills you can safely stop paying.
The two types of bills to stop paying immediately are credit card debt and medical debt. These are both unsecured debts that you can discharge in bankruptcy, so continuing to pay them means you're throwing your money away.
What if you're filing for Chapter 13 bankruptcy? It doesn't matter. Unsecured debts may be included in your payment plan, but they typically receive the lowest priority. And once you complete all your payments, any remaining unsecured debt will be discharged. It's better to keep as much money as you can in your bank accounts so that a lack of funds doesn't stop you from filing.
With secured debt, such as a mortgage or a car loan, you'll need to decide if you want to keep the asset that's tied to the debt. If so, then you should continue making your payments as best you can. If not, you can stop.
The total cost of filing for bankruptcy
In a best-case scenario, your bankruptcy could be free. For that to happen, you'd need to qualify for fee waivers on your filing and course fees, which means having an income that's less than 150% of the federal poverty guidelines. You would also need to either file your bankruptcy on your own or receive free legal assistance.
Otherwise, here's how much you should expect to spend for each type of bankruptcy:
Type of Bankruptcy
$40 to $100
$1,000 to $1,500
$1,375 to $1,935
$40 to $100
$2,500 to $3,500
$2,850 to $3,910
Data sources: U.S. Courts and author's estimates
Bankruptcy can be expensive, but depending on your financial situation, you could get at least some of your costs waived. And if you stop paying certain bills and save up money in the months before you file, it can make the cost of bankruptcy much more manageable.
Regardless of how much you spend on your bankruptcy, what's more important is what you do after you've completed the process. The last thing you want is to end up in financial trouble again, so you should work hard on recovering from bankruptcy and avoiding the same type of money troubles in the future.
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