It’s disheartening to see yourself potentially drowning in a sea of debts with no way out except to keep paying your creditors. To make it worse, you are also aware that you don’t have any more means to pay them. Don’t pity yourself just yet. There are ways to get out of that misery.
You could try negotiating with your creditor for a settlement. You could consult your credit counselor about methods to settle your debts. But if none of these work, you could also free yourself from the nightmare that is your debts through filing bankruptcy.
Ironically, filing for bankruptcy will cost you more money. But what is spending a few hundred or thousand dollars if it will allow you to start all over again, right?
With that said, here’s a round-up of the average filing bankruptcy price you should consider before making your decision.
Average Cost of Filing Bankruptcy
If we take into consideration figures from the National Bankruptcy Forum, you would likely spend more than US$300 for the filing. For example, if you’re filing under Chapter 7, you would have to pay US$335. On the other hand, a Chapter 13 case would cost you US$310.
Aside from paying for the filing fees, you would also have to pay for an attorney. Hiring one will cost you about US$2,000 to US$4,000 depending on the firm and the type of bankruptcy you want to file.
The total cost of filing will vary based on your choice. Say you chose to file for a Chapter 7 bankruptcy with the assistance of an attorney who charges US$1,250. That will be US$335 + US$1,250 for a total of US$1,585.
Aside from the filing bankruptcy price, you should also prepare for additional costs. For instance, the Bankruptcy Trustee may charge you US$15 to US$20 upon filing your petition.
You could also spend up to US$25 for a conversion fee. The said fee applies to cases when you have to convert your case to Chapter 7 because you’re not qualified to file under Chapter 13. Converting to Chapter 13 from Chapter 7, however, will not cost you any extra money.
Miscellaneous fees in bankruptcy courts, according to the United States Courts’ website, consist of the following:
- Reproducing any document: US$.50 per page
- Certification of any document: US$11
- Exemplification of any document: US$22
- Reproduction of an audio recording of a court proceeding: US$31
- Filing an amendment to the debtor’s schedules of creditors or mailing list: US$31
- Conducting a search of the bankruptcy court records: US$31 per name or item
- Filing a complaint: US$350
- Filing any document that is not related to a pending case or proceeding: US$47
- Payment to trustees pursuant to 11 U.S.C. (b)(2): US$15
- Converting a Chapter 12 case to Chapter 7: US$45
- Filing a motion to reopen: US$200 to US$1,167
- Administrative fee: US$75 to US$550
- Any payment returned or denied for insufficient funds: US$53
- Filing an appeal or cross-appeal from a judgment, order, or decree: US$293
- Filing a transfer claim: US$25
- Filing a motion to redact a record: US$25 per case
The average cost of filing bankruptcy also depends on these miscellaneous fees so it would be wise to include them in your budget.
Hiring an Attorney
You’re not required to hire an attorney but we recommend it. Why? Having a lawyer to assist you will increase the success rate of your petition. For example, data by the National Bankruptcy Forum shows that in Los Angeles, the success rate for Chapter 7 cases handled by an attorney is 95%. That is 35% higher than the 60% rate for those filing “pro se”.
If you’re all for the success of your petition, how much will it cost you? The average fee for an attorney handling a Chapter 7 case is US$1,250. The fees range from more than US$700 to US$2,000 and up. Lawyers for a Chapter 13 case, on the other hand, may charge around US$3,000.
The exact cost of hiring an attorney will depend on his/her firm, what type of bankruptcy petition you want to file, and the complexity of the case. You will likely pay more if there’s litigation involved that requires longer court time.
The price for filing a Bankruptcy petition may be too costly for some. If that’s the case with you, there are options you can consider to be able to save money.
One is to seek for free legal help. The state provides free counseling services and bankruptcy clinics for low-income individuals. To avail of the free service, check with your local government to see if you’re qualified.
You could also ask the court if they will allow you to settle fees through installment. Better yet, you could ask them to waive your fees altogether, provided you can prove that you can’t afford to pay and your income is less than 150% of the poverty line.
Also, try looking for attorneys who offer free or discounted consultations. Consulting them first will help you decide on whether you need to file a petition or to opt for other methods to solve your debt problem. You can also get more information on how much does it cost to file bankruptcy through consulting legal professionals.
When to File a Bankruptcy
You now know how much does it cost to file bankruptcy. You also have learned that there are ways to cut down on expenses. After these, what’s next?
Of course, you need to know when you should consider filing for bankruptcy. The easiest way to do that is to ask your credit counselors, but having a general idea of when it’s time to go to the courts would be helpful.
You should consider filing your petition when your creditor refuses to negotiate or form a repayment plan. If your creditor still insists that you pay but you won’t be able to magically produce money, you have little choice.
It is also natural to opt for bankruptcy if your liabilities exceed your assets. After all, how will you pay your debt if it is larger than the income you make in a month?
Filing for bankruptcy is an extreme measure so you should carefully look at all angles before you consider the said option. Also, keep in mind that it has its share of negatives.
For instance, it won’t be easy to obtain lines of credit if your record shows that you’ve declared bankruptcy. It could also affect your qualifications for getting a loan. If by any chance a bank will allow you to process loans for a car, business, or any other significant asset, chances are that they will increase the interest rate and ask for a higher down payment.
A final word of advice: don’t rely on credits too much. Debts are unavoidable, but try to minimize it. Live within your financial capacity and not beyond your means. After all, being debt-free would give you peace of mind and happiness. Choose the better path!