Many people considering bankruptcy ask about costs almost immediately. That’s no surprise, since most people contemplating bankruptcy are living on a tight budget, or even going further into the red each month as interest and late fees add up.
The answer depends in part on which type of bankruptcy you’re filing. Most costs, including filing fees, bankruptcy trustee fees, and attorney fees are different for Chapter 7 cases than for Chapter 13 cases.
Costs Common to Both Types of Consumer Bankruptcy
Debtors pursuing either Chapter 7 or Chapter 13 bankruptcy are required to complete both pre-filing credit counseling and a pre-discharge financial management course. Fortunately, there are many options available for completing these sessions online or over the telephone, and the cost is relatively low. The U.S. Department of Justice provides a listing of approved credit counseling agencies and approved financial management courses (also known as “debtor education”) by state.
Many providers charge less than $25 per session, and some provide both credit counseling and debtor education and offer a discounted package price.
Chapter 7 Bankruptcy Costs
Chapter 7 bankruptcy is by far the more popular type of consumer bankruptcy, since it allows many people to wipe out unsecured debt fairly quickly. In 2018, there were 6,208 Chapter 7 bankruptcy cases filed in the Las Vegas division of the U.S. Bankruptcy Court for the District of Nevada, compared with 1,348 Chapter 13 cases.
The filing fee paid to the U.S. Bankruptcy Court in a Chapter 7 case is $335. Typically, this fee must be paid along with the bankruptcy petition. It is possible to petition for a fee waiver. However, fee waivers aren’t granted lightly. To qualify, you must fall below 150% of the federal poverty level and show that you are unable to make installment payments.
If you’re not eligible for a fee waiver, you may be able to pay the filing fee in installments. In the District of Nevada, a minimum payment of $80 is due within two days of filing the petition. The fee can be broken into no more than four installments, with the final payment due within 120 days.
The Chapter 7 bankruptcy trustee receives a portion of the filing fee as compensation for his or her services. In the very small percentage of Chapter 7 cases that include non-exempt assets to be liquidated for the benefit of creditors, the Chapter 7 trustee will receive additional, percentage-based compensation.
Attorney fees in a Chapter 7 case vary depending on factors such as whether there are issues in the case that don’t fall within standard fixed-rate pricing. When you schedule a free consultation with a Las Vegas bankruptcy attorney, the lawyer will explain the fee structure and the circumstances in which additional fees might be required.
Because bankruptcy petitioners aren’t allowed to take on new debt in anticipation of filing bankruptcy, Chapter 7 fees must be paid in full in advance of filing, and cannot be paid with credit.
Chapter 13 Bankruptcy Costs
At $310, the filing fee for a Chapter 13 bankruptcy case is slightly lower than the fee for a Chapter 7 case. Like a Chapter 7 filer, a Chapter 13 petitioner can make a request to pay the filing fee in four installments if he or she is unable to pay the full fee at the time of filing.
A Chapter 13 bankruptcy trustee has more responsibilities than the trustee in a no-asset Chapter 7 case, and a Chapter 13 case goes on for much longer–three to five years for a Chapter 13 case versus less than six months for many Chapter 7 cases. So, the Chapter 13 trustee receives greater compensation. However, that compensation is paid as a percentage of creditor payments, and is built into the monthly Chapter 13 plan payments.
Attorney fees in a Chapter 13 case may vary in the same way Chapter 7 fees may. For example, a bankruptcy attorney will typically offer a flat fee for a standard Chapter 13 case. But, a case involving contested hearings or other issues outside the scope of the typical Chapter 13 case may mean additional fees. Your bankruptcy attorney will explain the fees in detail during your initial consultation, and will tell you exactly what is included in flat-rate pricing and what type of services will result in additional costs.
Though Chapter 13 attorney fees are typically higher than Chapter 7 fees, payment of Chapter 13 fees works differently, and so is often more manageable. While Chapter 7 fees must be paid in advance of filing, Chapter 13 attorney fees can be broken up and built into the three to five year repayment plan.
Bankruptcy is an Investment in Your Future
Many people considering bankruptcy are worn down by debt and see filing for bankruptcy as conceding defeat. But, the decision to file for bankruptcy protection can be a powerful means of reclaiming control over your financial life. Bankruptcy can call an immediate time-out on collections, and then position you for a stronger financial future, whether through elimination of unsecured debts that are keeping you stuck in a cycle of minimum payments and high interest rates or a Chapter 13 plan that allows you to catch up past-due balances over time.
Choosing the right bankruptcy attorney is an important part of that process, and pricing is just one factor to consider. If you’re thinking about bankruptcy, use your free consultation to ensure that the attorney you are considering is knowledgeable, understands your concerns, and provides the information you need to make an informed decision.