For any person, whether he/she is a celebrity or a common man, filing a bankruptcy is a difficult decision to make. It requires a lot of thinking and a subtle strategy to make things work properly. The debts may not be letting you spend your days with peace and it has become inevitable to file bankruptcy. In a time, where you are already short on your finances, it becomes crucial to know, “How much does it cost to file bankruptcy?” Well, you have landed on the right page. In this article, we will tell you about the cost and all other necessary information related to bankruptcy.
First of all, do not be depressed due to the current situation of yours. Remember, it is just a temporary phase, which will pass and you can overcome it through proper planning of your resources. For most of the people, the situation of bankruptcy lasts for about one year or a bit more. Think of bankruptcy in a positive manner as a chance to start everything freshly.
What Is Bankruptcy?
There come times in businesses or in the lives of individuals when their finances do not go well. So, Bankruptcy is a system implanted by the Federal Laws which helps such genuine debtors to get rid of all the financial debts and start with a clean identity.
What Are The Types Of Bankruptcies?
There are 2 types of Bankruptcies as follows:
Chapter 7 Bankruptcy:
Most of the people file bankruptcy under Chapter 7. It is also known as “straight bankruptcy”. Individual consumers or businesses can file this type of bankruptcy.
In this type, your non-exempt assets are sold and the amount is handed over to an appointed trustee. Thereby, no creditors can contact you directly. Instead, the trustee pays them off the debts, using the acquired amount. Once all your assets are liquidated and the creditors are paid, you are no longer liable to pay any amounts to anyone, the rest of your debts are cancelled.
You should keep in mind that certain debts are not discharged under Chapter 7 bankruptcy. They are:
- Child support
- Judgements passed for drunk driving or restitution or criminal charges
- Debts that you may have incurred by wrong deeds or any fraud
- Student loan
- Back taxes which are not yet 3 years old
- Recent shopping through substantial amounts
- Contracts that are well executed and that involve liens or titles
Chapter 13 Bankruptcy:
In this type of bankruptcy, all your debts are scheduled for repayment over a span of three to five years, in a manageable way. You can repay gradually and the amount of instalments will depend upon your income, amount of debt and the type of the debt.
You cannot be discharged from following debts when you file bankruptcy under Chapter 13:
- Child support
- Criminal fines
- Judgements passed for drunk driving
- Student loan
Analyze your situation and decide which type of bankruptcy will be more convenient to you.
How Much Does It Cost To File Bankruptcy?
First of all, you will need to pay the fees for filing. This will cost you about 335 USD, under chapter 7. On the other hand, it will cost 310 USD to file bankruptcy under chapter 13. Also, you may be charged a sum between 15 USD to 20 USD, by the Bankruptcy Trustee.
Well, you can request to make the payment of the filing fees in instalments. You will be allowed to do so by most of the courts if you can prove that you will lend into financial distress if you pay the fees altogether.
Sometimes it may happen that you may have to convert to chapter 13 bankruptcy, as you may not qualify for exemption under chapter 7. In such a case, you do not need to pay extra or again. But when you are not able to follow the repayment schedule under chapter 13, you may have to opt for chapter 7. In this case, you will have to pay about 25 USD as a conversion fee.
Besides the filing fees, you will have to take up personal financial management course and credit counselling, which may cost you 50 USD to 100 USD, depending on your location of filing.
What Are The Average Attorney Fees?
Under the Federal Laws, you can file the bankruptcy without an attorney or as it is called “pro se”. But the success rates have been noted very low, till date. Of course, the attorney fees acquire the majority of the fees cost and you are already short on cash, but it is advisable to hire an attorney to make your case smoother. You can expect to pay as follows:
Under Chapter 7:
The average fees of attorney under Chapter 7 range from 500 USD to 3500 USD. Moreover, the amount also depends on the complexity of your case and your financial condition. Moreover, location is also a major factor affecting the amount of the fees, as the charges will be more in metro cities compared to small towns. An experienced attorney will charge more than a fresh practitioner. Also, a large firm will have more fees than a solo attorney.
Under Chapter 13:
Under the Chapter 13 bankruptcy, there are pre-decided fees as per the guidelines of the courts. Each judicial district has different guidelines fees. But still, you can expect to pay your attorney an amount ranging from 2500 USD to 6000 USD. The amount majorly depends on the factor whether you are a business house or an individual.
Well, under Chapter 7 bankruptcy, you will have to pay the whole amount of the fee to you attorney beforehand. On the other hand, under Chapter 13 bankruptcy, you may have to pay only a small amount to your attorney, upfront. The rest of the amount will be paid in accordance with your repayment plan.
Moreover, the general practice is that an attorney may charge you a flat amount of the fee. But some of the attorneys have started charging on an hourly basis, these days.
Can You Get Free Legal Help?
In each and every state, the individuals with fewer resources or low income are eligible to obtain free legal help. If you qualify, you can also obtain free access to bankruptcy clinics and credit counselling service.
Hope that you have got a satisfactory overview regarding ‘How much does it cost to file bankruptcy?’ through this article. If you have any query, feel free to ask in the comment box given below.