The Average Cost of Chapter 7

By Nichole Hoskins

Filing a Chapter 7 bankruptcy case may seem like a costly endeavor. The fees and costs associated with a bankruptcy filing can add up quickly, but when you consider the emotional and financial toll you might suffer by trying to pay down debts you cannot afford, the cost of a bankruptcy proceeding seems more reasonable.

Filing Fees

As of November 2012, the cost for filing a Chapter 7 case in any U.S. Bankruptcy Court was set at $306. You must pay the filing fee, regardless of where in the country you file your case or how much income you earn. If necessary, you can ask to pay the filing fee in installments. To request an installment plan, you will need to file an application with the court at the same time you file your case. If making installment payments is not affordable and you earn less than 150 percent of the poverty guidelines established by the U.S. Department of Health and Human Services, file an application to waive the filing fee with your bankruptcy petition. The fee waiver is only an option for individual debtors and not for incorporated small businesses choosing to liquidate through a Chapter 7 filing.

Attorney's Fees

Most attorneys charge a flat fee for a Chapter 7 case, with the average cost falling somewhere around $1,300, as of 2013. The total fee usually includes costs for the attorney's services and expenses like copies and postage. In addition to the flat rate, many attorneys will require additional fees if they have to prepare or defend motions or spend more time in court than anticipated. Most experienced bankruptcy attorneys offer an initial consultation at no cost. A free consultation gives you the opportunity to meet the attorney, discuss your options and decide whether Chapter 7 is really the best option for you. While it may be tempting to seek a bargain, if an attorney charges fees far below other bankruptcy lawyers in the area, you should be cautious.

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Credit Counseling Courses

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires debtors to complete two education courses during the course of their case. To start the case, you must complete credit counseling, and to discharge your debts, you must complete a debtor education course. You may take the courses live, over the telephone or online. Many approved course providers are non-profit organizations and offer these courses for reasonable fees, which range from about $8 to $40 per course. After you have successfully completed each course, the provider will present you with a certificate, which you must submit to the court.

Additional Considerations

You may wonder whether it would be less costly to file your Chapter 7 case without an attorney, or "pro se." Some very good services exist to help a pro se debtor prepare the bankruptcy paperwork for less than the cost of hiring an attorney. Unfortunately, these services cannot offer any legal advice. The bankruptcy code is a complex set of rules, and you can unknowingly jeopardize your rights or subject yourself to criminal penalties if an error is made. Some state bar associations offer referrals to agencies that offer experienced bankruptcy attorneys to low-income debtors. Consider an online legal document services provider to handle this for you or contact your local bar association and find out if they can recommend a bankruptcy lawyer who will offer quality representation at reduced rates.

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Individual debtors generally choose between two types of bankruptcy, Chapter 7 and Chapter 13. Under Chapter 7 bankruptcy, a bankruptcy trustee will liquidate your non-exempt assets and use the proceeds to pay your creditors. After that, you receive a debt discharge. Under Chapter 13, you repay your debts over three to five years, and any debt discharge is strictly limited. Both forms of bankruptcy are subject to eligibility requirements.

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If you're experiencing financial hardship and considering filing for bankruptcy, you'll need to have a legitimate reason. Individuals usually file under Chapter 7 bankruptcy proceedings -- sometimes called "debt wipeout," or under Chapter 13, which offers a repayment plan with creditors while the debtor is under court protection. Before you file for bankruptcy, consider your financial circumstances, your debt level and your reasons for doing so -- bankruptcy will impact your finances beyond your immediate debts.

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