Filing for bankruptcy can be expensive. Hiring an attorney and paying court filing fees can cost you anywhere from hundreds to several thousand dollars. When you’re in tough financial shape, this added cost can seem stressful…and even impossible.
Don’t fear: you have options. Here is a breakdown of what bankruptcy costs and how to afford it.
The Cost of Bankruptcy
Filing for bankruptcy comes with two types of expenses: court filing fees and attorney fees.
An attorney is critical to filing for bankruptcy, as they help file your petition, represent you in court, and take over communication with your creditors.
The two types of bankruptcy are Chapter 7, in which most or all of your debts are forgiven, and Chapter 13, in which your debts are reorganized into a repayment plan.
Here is an estimated breakdown of what you can expect to pay*:
|Chapter 7||Chapter 13|
|Court Filing Fees||$335||$310|
|Attorney Fees||$1,000 – $1,500 /|
|$1,500 – $6,000|
|Total||$835 – $1,835||$1,810 – $6,310|
*Please note, attorney fees vary greatly based on location and complexity of your case.
When filing Chapter 13 bankruptcy, the court will review your attorney fees to find out if they’re reasonable.
(At Burr Law office, we offer monthly payment plans starting with as little as $100 down.)
Your Bankruptcy Payment Options
If you are filing Chapter 7, you may be required to pay your attorney fees before they file your case. The reasoning behind this is: if you are granted Chapter 7, all unsecured debts are wiped out, including any outstanding attorney fees.
If you cannot afford these costs, you have three options:
- Raise the money.
- Establish a payment plan.
- Find a pro-bono attorney, or one who will take your case without charging a fee.
- Raising the money. Use these steps to minimize your expenses and save enough to cover your costs:
- Stop payment on credit cards. If you’re planning to file for bankruptcy, continuing to pay your credit cards is not useful. Save that money and put it toward your bankruptcy costs.
- Secure additional income. Sell big-ticket items, like furniture or electronics, or find part-time employment.
- Ask family or friends for help.
- As a last resort, you can borrow against your 401(k) or IRA. However, doing so may deplete the money you will need in retirement.
- Using a payment plan. The right attorney may agree to payment in installments. Ask the lawyer you are considering about their payment plan policy during your initial meeting. Please note: most attorneys will require payment upfront before filing a Chapter 7 bankruptcy case.
Your attorney may also work with the court to allow you to pay your court filing fee in installments.
- Finding a pro-bono attorney. If your household income is less than 150% of the federal poverty line for your family size, you may qualify for free legal assistance. You have several options for finding a pro bono attorney:
- Reach out to your local bankruptcy court to request information on local free legal aid resources and free legal clinics. These organizations may be able to connect you with free legal assistance, but be aware: legal aid organizations are often extremely busy and understaffed.
- Research The American Bankruptcy Institute’s bankruptcy attorney directory for more pro bono resources in your area.
- Contact your state’s bar association to inquire about free legal aid. Some attorneys are required to take on 10%-15% of their caseloads as pro bono work.
- Consider hiring a petition preparer instead of a lawyer. If you’re in a rush to file your bankruptcy, a petition preparer will help you fill out paperwork for an hourly fee. Though they can’t give you legal advice like an attorney would, a petition preparer is a good solution if you are looking to quickly trigger the automatic stay that halts collection efforts.
- Finally, we strongly advise against filing on your own without the help of an attorney or petition preparer. Bankruptcy filing is an extremely complicated process and it is easy to make mistakes, which could lead the court to throw out your case.
When making decisions about bankruptcy, you may feel that the deck is stacked against you. But remember: you have options. And if you’re in the Milwaukee area, the experts at Burr Law Office are here to help. We have earned a reputation as experienced advocates, and can help you reclaim your life and get a fresh start. Give us a call today!