Costs To File Bankruptcy Explained

Bankruptcy is a term that scares most of the people. If you are here, probably, you want to know more about it. Don’t worry as you are not the only one facing this. There are more than 700,000 cases of bankruptcy registering in USA every year. It is just a legal process which is designed to help any companies or individuals to get a fresh financial start. This is done by making some arrangements or discarding the unmanageable debts. If you are thinking about filing a bankruptcy case, you have to know how to do it and how much it costs. Read on to know more about bankruptcy and costs to file bankruptcy explained below.

Types of bankruptcy

When any business or a person is not able to repay their debts any longer, they can seek to file for bankruptcy. If you are planning to file one, then you have to know about the different types of bankruptcy that are available. These different types have different qualifying factors. We will discuss the most common types of bankruptcy i.e. Chapter 7, Chapter 11, and Chapter 13.

Chapter 7 Bankruptcy: This type of bankruptcy is called liquidation and it is, by far, the most common type of bankruptcy for the individuals. There are more than 483,988 cases filed under Chapter 7 in the year 2019. Approximately 62% of the bankruptcy cases fall under this Chapter. Generally, in these cases, the law is to sell off some of the assets of the person to be distributed among the creditors. But 96% of the cases filed under Chapter 7 are found to be &#2013266048;no-asset’ cases.

But this depends from state to state. There are some states where the court will not force you in selling your properties or assets. Hence, most people are able to hold on to some of their important and basic necessities such as a car, house, and retirement accounts in Chapter 7 bankruptcy. Also, there is no guarantee that Chapter 7 will stop a foreclosure. It can help you by postponing it. You can file for Chapter 7 bankruptcy only when the court decides that you don’t have enough earning or income. But the Chapter 7 bankruptcy can stay on the credit report for about 10 years and you cannot file for another for at least 8 years after filing one.

Chapter 11 Bankruptcy: This Chapter of bankruptcy stands for business reorganization. When you a business or organization files for bankruptcy, it doesn’t always mean ruin. Chapter 11 bankruptcy is used for reorganizing the businesses or corporations. This bankruptcy Chapter protects the troubled businesses from the creditors when they are reorganizing the debts, assets, and business operations.

It, generally, takes a few years for the business to re-emerge properly. Often, the businesses come back to be smaller yet more efficient and profitable. The creditors can then get a better return. Chapter 11 helps the businesses to only buy some time for proper reorganization.

Chapter 13 Bankruptcy: This is the second most common type of bankruptcy for individuals. Though Chapter 13 is customarily reserved for the people or individuals, it can also be used for the small business bankruptcy by single or sole proprietorships. This is because in the eyes of the laws, an individual person and sole proprietor are the same and they exist as one. While Chapter 7 bankruptcy will often forgive your debt, Chapter 13 will help you in reorganizing it.

Here the court will approve your monthly payment plan so that you can pay off a certain portion of the unsecured debt and all of the secure debts in 3 to 5 years. The monthly payment will depend mostly on the amount of money you earn and the total amount of your debt. But at the same time, the court can put you on a strict budget with regular monitoring of all your spending.

Anyone with a total amount of unsecured debt up to $419,275 can file for Chapter 13 bankruptcy. One thing that you should know is that Chapter 13 bankruptcy will stay on the credit report for at least seven years. You cannot file or another bankruptcy for at least 2 years.

Cost of filing bankruptcy

If you are here to determine what will the total cost of filing a bankruptcy, then sadly, there is no straight answer to it. There are many factors that determine how much it will cost to file your bankruptcy case. If you are planning to file bankruptcy it is because you’re financially struggling and having a hard time paying off all your debts. In this scenario, it is important to know the cost of filing bankruptcy.

Unfortunately, filing for bankruptcy is not free. There are some fees that you have to pay for it. In order to file a bankruptcy case, you will have to pay credit counseling fees, court fees as well as attorney fees. While the cost of credit counseling fees and court fees are determined by the states you live in, the attorney fees will depend from one attorney to another.

As of the year 2019, the court fee set by the United States Court to file Chapter 7 bankruptcy is $355 and to file Chapter 13 bankruptcy is $310. This is the basic fixed cost of filing the bankruptcy. If any lawyer or attorney services claim that you can file bankruptcy in a lesser amount than the stated ones, then it might be a scam. Besides the court fees, filing the bankruptcy can incur some additional costs or fees due to certain actions. For instance, if you want to convert your Chapter 13 bankruptcy case to a Chapter 7 bankruptcy case, you will have to pay some additional fees for the conversion. Here is the complete breakdown of the costs of filing bankruptcy along with an explanation.

Cost of Chapter 7 bankruptcy:

As discussed, the total fees of filing the Chapter 7 bankruptcy case levied by the court are $335. Here:

The fee for filing the case is $245
The administrative fee is $75
The trustee surcharge fee is $15

In case you want to re-open the Chapter 7 case, you have to file for $260.

Cost of Chapter 11 bankruptcy:

The cost of filing a Chapter 11 bankruptcy case is the most. Here is the breakdown of the costs:

Fee for filing the Chapter 11 case is $1.167
The administrative fee is $550

Along with these the Chapter 11 debtors may also have to pay the trustee surcharge fee. The Chapter 11 bankruptcy case is a very complex case that will also need a highly experienced attorney specialized in bankruptcy. This can result into a high cost in total.

Cost of Chapter 13 bankruptcy:

As discussed above, the total cost of Chapter 13 bankruptcy that court charges is $310. Here:

Fee for filing is $235
The administrative fee is $75

In case you want to re-open the Chapter 13 bankruptcy case, you have to again pay $235.

Attorney fees for bankruptcy

Do you want to know the cost of the attorney for handing your bankruptcy case? Well, this is subjective from one lawyer to another. Even there are different factors too that determine the final cost of the lawyer. As mentioned above, there are three main types of bankruptcy cases. And the cost of filing these cases can also differ based on the Chapters of the bankruptcy case. Here are the average costs of the attorney that you may have to pay if you are hiring a high-quality bankruptcy lawyer for handing your cases:

The average cost of the attorney for Chapter 7 bankruptcy is $1,072, according to the data from 2005 to 2009 studied by an American Bankruptcy Institute. The cost can be as low as $781 to as high as $1,530 or even more.
The average cost of the attorney fees for Chapter 13 bankruptcy is $2564, according to the studies by the American Bankruptcy Institute. The cost of hiring an attorney can range from as low as $1,560 to as high as $4,950.
The average cost of the attorney fees for Chapter 11 bankruptcy can be as high as $8,000. It can even go to as high as $10,000 depending on different factors.

The factors that determine the exact cost of the attorney fees for filing your bankruptcy case depends mainly on three factors. These are:

State/Locality: The cost of the attorney will depend a lot on which state you belong to or the locality you live in. If you ask for the quotes in Arizona and the same quotes in New York, the two fee structures will be quite different. So, you have to know the exact cost of hiring the bankruptcy attorney in your state.

Type of the case: The next factor that determines the cost of the attorney is the type of case. You may ask for the quotations from the attorney and they can provide you with the estimation. But at the same time, they will ask for a consultation. Once they study your case, they will be able to tell you about the fees.

Law firms: Of course, the fees of the attorney vary from one law firm to another even though they are located in same city or state. This is because of its firm policy. You can definitely ask for rebates or discounts, but it depends entirely on the law firm whether or not they will consider it.

Choosing the right bankruptcy attorney

Of course, you can research online to find the best lawyer for handling your bankruptcy case. But you have to talk to the individual attorneys or the law firms to discuss their fees and costs. Make sure to go through the detailed services before you hire one. While looking for the attorneys, follow these steps:

Step 1: Research online

The first and foremost step that you have to consider is proper research. The bankruptcy case is one of the biggest cases and you cannot take it lightly. You need to ensure that you are choosing one of the best and most efficient lawyers for handling the case. Look for the recommendations too from the people you know that will be able to help you in finding the best lawyers.

Step 2: Run a background check

The next thing that you have to do is to do a thorough background check. It is important to know some of the intricate and important details. One of them is the experience and reputation. Of course, you have to know about how long the law firm is there in the business. With experience, lawyers tend to get more skills and better knowledge. Also, do a background check to know about their reputation, license, and genuineness.

Step 3: Check the reviews now

Once you have shortlisted the best attorneys or the law firms in your state, you have to do further research. You need to check the reviews and feedbacks of each and every shortlisted lawyer and law firm. Checking the reviews and feedbacks can give you a lot of information about how the firm is and what type of services they provide. Based on this, you can decide whether or not you want to choose this service.

Step 4: Go through the success rate

When you are about to handle a bankruptcy case to a law firm, you need to know what their success rate is. It is extremely important to know if they can successfully handle different cases. The best way to ensure that your case is in the right hand, you have to check the cases they have handled before and how many of them are successfully resolved. The bankruptcy cases can be quite expensive, as mentioned above. So, you have to make the best decision.

Step 5: Ask for the quotations

The next step is to ask for the quotations. Of course, it is very important as the price is a major factor when you are filing a bankruptcy case. You are already will already have some budget constraints. But make sure to choose the best quality bankruptcy lawyer service at the most competitive rate. You cannot expect the best result by choosing an incompetent lawyer just to get the cheapest service. However, you also must know that the expensive lawyers don’t guarantee 100% effectiveness. You have to choose the best lawyer at the most effective price.

Step 6: Free consultation

This is the final step of choosing the right lawyer for the bankruptcy case. Once you have compared all the quotes and found the ones you want to work with, you have to ask them for a free consultation. Here, you will sit one on one with them and consult your case. This will give you clarity on whether or not you want to work with them. You will also know more about whether or not the lawyers understand your case and can help you with the same.

How to pay for the bankruptcy case?

Filing for bankruptcy cases means that you are having financial problems and you cannot repay the debts. In such a scenario, paying such a huge amount for case filing and lawyers can be really tough for you. Once you have figured out about which Chapter you want to file and which lawyer you want to hire, it is time for you to decide how to pay for the bankruptcy.

Raise the money – The first step that you have to follow is the free up some of the money. You can minimize the outgoing cash. Stop paying for the credit card bills, if you are still doing that. When you are filing for bankruptcy cases, you just don’t need to pay all those. In fact, you need to save the money and put it in the right way to file the bankruptcy case. In Chapter 7 bankruptcy, the unsecured debts like credit card bills are completely wiped out. So, it doesn’t make sense to pay them if you are already opting for debt relief options.

Prepare a payment plan – It is important to prepare a complete payment plan when you are consulting with a lawyer for filing the bankruptcy case. This will help you to figure out all the payments that you have to make. Keep the cash in hand that you will likely pay as that will help you to keep a complete track of without messing up all the calculations.

Ask for Pro Bono – Some of the people qualify for the free legal services waiving of the lawyer fees. When your income is less than 150% of the property level, the law firm can help you to get a Pro Bono service. This will help you more to save the money for another emergency issue. For more details about Pro Bono services, you have to talk to the legal firm.

Conclusion

This is all about the cost of filing a bankruptcy case. Try to talk to the best and most efficient bankruptcy lawyers so that they can help you to get the best service. Filing the bankruptcy case is not easy and it can be complicated at times. Without major legal experiences, it is not possible to handle these legal complications. Hence, follow the above tips and steps to find the best bankruptcy lawyer for your situation. The bankruptcy can take a toll on everyone’s mind. It is surely a tough and stressful situation where you have to handle the financial condition as well as your family all at the same time.