How Much Does Bankruptcy Cost?
One of the most common questions we get asked by potential clients is how much does it cost to file bankruptcy? Typically, we explain that the cost of filing bankruptcy varies depending on the complexity of the case (i.e. the number of assets involved, the number of creditors involved, specific factual circumstances, etc.). Even though it can vary, we tried to come up with our best overview of the cost to file Chapter 7 bankruptcy without significant complications such as adversary proceedings:
Filing Fees and Court Costs
Part of the cost to file bankruptcy are filing fees paid to the court when you initially file. In the Northern District of Ohio, for example, the filing fee for a Chapter 7 bankruptcy is $335.00. In the Eastern District of Michigan, the filing fee for Chapter 7 bankruptcy is also $335.00. Bankruptcy courts themselves will also keep track of certain costs that they will charge to the litigants before the court. This can include things like $0.50 for pages of copies made by the Court. It depends on the local court so speak with your local bankruptcy attorney about the filing fees and court costs involved in your case.
Part of obtaining a bankruptcy discharge is completing two courses that teach you important principals regarding credit and financial management. You will be required in most cases to take a course prior to filing for bankruptcy and a course within 60 days of the first creditor meeting. The costs of these courses can vary depending on your jurisdiction. Here’s a list of approved credit counseling agencies.
Attorney’s fees can be a large portion of the cost of filing bankruptcy. Even though the cost can be high, it makes the most sense to hire a competent and experienced bankruptcy attorney before anything else. Check out our article on whether you should hire a bankruptcy attorney or not to learn more. In general, you can expect to pay anywhere from $1,200 to $2,000 on a bankruptcy. The cost will vary if your case is particularly complex or your lawyer is very experienced or lives in a high cost area. This should include the cost of at least the filing fee for your bankruptcy case which be several hundreds of dollars.
When does your bankruptcy attorney get paid? In the typical case of am individual filing under Chapter 7, most bankruptcy attorneys will require you pay their fees up front. This may be counterintuitive since you are filing bankruptcy because you are unable to raise funds to pay your creditors. Remember, if your bankruptcy is successful, all your debt goes away. While your credit will take a hit, in a successful bankruptcy you will not be required to pay your bills for a couple months and so you should be saving as much as you can and paying that money to your lawyer to ensure your bankruptcy rights are protected.
There’s another more practical reason why you must pay your attorney up front before filing bankruptcy. For a typical bankruptcy under Chapter 7, the entire fee must be paid before filing, otherwise, the lawyer would technically become a creditor and the debt will be discharged. It also technically cannot be collected in violation of the automatic stay.
When Might Attorneys Fees Increase the Cost of Filing Bankruptcy?
- A Bankruptcy Trustee objects to your valuation of some property you want to exempt.
- A creditor has some basis to institute of separate lawsuit within the bankruptcy case to fight against a discharge of the debt under the Bankruptcy code.
Remember, most states provide some type of legal assistance for low income citizens. In every state, low-income individuals have access to free legal help. If you’re considering filing for bankruptcy or struggling with debt, the state provides free credit counseling services and bankruptcy clinics. Reach out to your local legal aid society to see if you qualify for free legal aid.