How much does it cost to file bankruptcy? What are the monetary advantages of filing bankruptcy? Can anyone file bankruptcy?
We hear these types of questions all the time. Some are easier to answer than others.
Personal bankruptcy, Chapter 7 and Chapter 13, has very low filing fees. For Chapter 7 bankruptcy, everyone pays only $299, while Chapter 13 costs $274 to file. That’s the good news, hopefully, because in comparison to the monetary advantages that come with filing, that’s a bargain.
These fees are paid to the court. They might not seem bad, but total costs should include your lawyer, so it can be different. You can expect some attorney fees to be low, but always read up on their experience. Some attorneys promise the world, and charge about the price of a car. Others charge nominal fees but slow the process, fail to help successfully, and are overloaded with work.
There is a fine line between cost and effectiveness. Let’s first highlight the advantages of Chapter 7 and Chapter 13.
Chapter 7 Advantages
Chapter 7 bankruptcy is a liquidation proceeding where the majority of your debts are discharged. That means you are no longer liable for them. There is some fine print: note “Liquidation,” which is where a trustee will sell your nonexempt property.
Exempt property is property you can keep. Nonexempt property you often lose. That may sound scary, but in many cases filers losing absolutely nothing. In some cases, your home and car are considered exempt.
The best part of Chapter 7 is the discharge of debts. While you can’t discharge alimony, taxes, and some other debts, you can discharge big debts such as credit card and medical debts. If you have $20,000 in credit card debt, for example, the best news is you can be free of it.
Chapter 13 – The Good
Chapter 13 bankruptcy is very different than Chapter 7, and has distinct advantages. If you have a home, an expensive car, and a high paying job, then 1) you may not be eligible for chapter 7 and 2) you may lose many assets if you file Chapter 7.
Why? The “liquidation” part of Chapter 7 is the problem. A trustee will sell your home, car, and other major assets.
However, in Chapter 13, you lose absolutely nothing if you can stay on pace with payments. That’s good and bad: you have to pay back debt, but you can keep all your assets. Chapter 13 is best for homeowners fearing foreclosure; it buys you time to catch up.
Hiring a Fair Lawyer
An attorney can typically cost between $1,000-$4,000. You want one who has the time, knowledge, and attitude to help your case. You want one who won’t overcharge you, especially for initial consultations, and who isn’t loaded with clients or puts you with a less experienced lawyer in the firm. It’s perhaps the most important choice, as delays in filing can mean foreclosure. The good news is, experienced bankruptcy attorney save you time and money.
