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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What If I Am Unable to Pay for a Bankruptcy Lawyer?

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Negative Effects of Chapter 13 Bankruptcy for an Applicant

Although a Chapter 13 bankruptcy offers some positive outcomes, including uncomplicated repayment plans and the eventual release of liability for certain types of debt, declaring bankruptcy can be a life-changing event. Understanding the advantages and disadvantages of filing for a Chapter 13 bankruptcy could help you make a well-informed decision before proceeding.

Pros & Cons of Filing Bankruptcy

Individual debtors frequently file for bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code, and either course can provide more pros than cons for certain debtors. To file under Chapter 7, you must meet certain income qualifications, but under Chapter 13, you must follow a repayment plan over three to five years. At the end of either type of bankruptcy, you may receive a discharge, or elimination, of certain remaining unpaid debts.

What Things Should You Bring to Your Lawyer for Bankruptcy?

To prepare for a bankruptcy filing, you must provide your attorney with complete and accurate information about your financial affairs, including your income and the debts you owe. A bankruptcy filing will protect you from debt collectors until you liquidate your assets or reorganize your debts. When you file a Chapter 7 bankruptcy, your eligible assets are liquidated and your creditors paid. Filing under Chapter 13, will reorganize your financial affairs, so that you can make affordable payments to your creditors. Your bankruptcy lawyer needs all the necessary information that federal law requires before he can file your bankruptcy petition.

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