“What does it cost to file bankruptcy?” This is perhaps the most consistent question I have been asked as a bankruptcy attorney and rightly so. Individuals and families considering bankruptcy as an option to get out of debt are struggling financially and cost is a concern.
I truly believe that the cost to file bankruptcy is a bargain and an investment in future financial freedom. When compared to the fees charged by debt settlement companies or monthly interest on accumulated debt, we are sometimes talking a fraction of the cost.
With that said, there are some generalizations for those looking for information on the cost of consumer bankruptcy.
CHAPTER 7 VS. CHAPTER 13
There are two types of consumer bankruptcy: 1. Chapter 7 Bankruptcy, and 2. Chapter 13 Bankruptcy. I will not get into detail on the functional differences between the two but more information can be found here.
There is a pretty significant difference in cost and I would estimate that a Chapter 13 will typically cost two to three times more than your average Chapter 7. For those that don’t qualify for Chapter 7 or want to retain control of their assets in bankruptcy, the financial barrier to entry for Chapter 13 can be steep.
On the other hand, Chapter 13 is typically more flexible in that attorney fees can be paid over time through the court ordered Bankruptcy Plan. In some cases, the up front cost to file Chapter 13 could be less than the up front cost to file Chapter 7.
ACTUAL COSTS
So what are the actual costs one can expect when filing bankruptcy. According to Credit Karma, the average Chapter 7 fee ranges between $500 and $3500. I realize that is not very helpful so I will say that my average Chapter 7 fee ranges between $1,200 and $2,200 with a large majority of my cases falling in the lower end of that spectrum.
Chapter 13 fees are typically capped by the Court in the jurisdiction where the case is filed. Again, according to Credit Karma, the average Chapter 13 fee ranges between $2,500 and $6,000. For clarity, my average Chapter 13 fee ranges between $3,500 and $4,500 with the large majority again falling on the lower end of that spectrum. Of course, there is more flexibility in how Chapter 13 fees are paid and in many cases the up front cost will be less than Chapter 7.
In addition to attorney fees, there are court filing fees and credit counseling fees that must be paid. The court filing fee for a chapter 7 is $335 and $310 for chapter 13. In some cases, depending on financial need, this filing fee can be waived or broken up into monthly payments to ease the financial burden of filing.
COST VS. INVESTMENT
While it is entirely possible to file a consumer bankruptcy case without an attorney, I believe the attorney’s job is to provide predictability and peace of mind.
With an experienced bankruptcy attorney, your case will most likely be decided after the initial consultation. Without an attorney, you are basically jumping without a parachute and hoping for a positive outcome.
I can usually give a debtor a clear picture of how their case will progress after the initial consultation so there will be no surprises.
A bankruptcy case should proceed with little to no conflict and be a stress free process. It should resemble a yoga session rather than a wrestling match. Your attorney is the yogi guiding you through the process and providing predictability.
Your bankruptcy attorney helps minimize the adversarial aspect of bankruptcy.
So while attorneys do charge a fee, it is impossible to place a value on this.
Paying an attorney to guide you through the bankruptcy process is an investment in your sanity, peace of mind, case harmony and most importantly, your financial future.