Chapter 7 bankruptcy provides relief for individuals and businesses that have no hope of ever repaying their debts. That’s why it seems strange to some that there are actual costs involved to get this relief. Keep in mind, though, that everyone’s case is different and someone’s inability to pay their debts as they come due does not necessarily mean that they can’t pay the costs of filing a Chapter 7. Let’s take a look at what they are.
Written by Attorney Jenni Klock Morel.
Updated November 18, 2020
When you're exploring debt management solutions a big consideration is how much it will cost. Bankruptcy costs typically include court filing fees and attorney fees. The total cost will largely depend on your financial situation, the complexity of your case, and whether you file Chapter 7 or Chapter 13 bankruptcy. Read on to learn about how much it costs to file bankruptcy along with helpful, cost-reducing options that may be available to you.
Costs of a Chapter 7 bankruptcy
Chapter 7 bankruptcy provides relief for individuals and businesses that have no hope of ever repaying their debts. Individuals have to meet a means test to show the court that they truly need the help. That’s why it seems strange to some that there are actual costs involved to get this relief. Keep in mind, though, that everyone’s case is different and someone’s inability to pay their debts as they come due does not necessarily mean that they can’t pay the costs of filing a Chapter 7. Let’s take a look at what they are.
Court Filing Fee
Generally, the bankruptcy court requires payment of a filing fee when a bankruptcy petition is filed. The Chapter 7 bankruptcy filing fee is $335.00. The filing fee is the same for pro se filers (people who file without an attorney), folks going through legal aid, and filers who have a bankruptcy lawyer help them.
If you need debt relief, don't let the bankruptcy filing fee deter you. Asking for a fee waiver or paying the filing fee in installments are helpful options that may be available to you. To be eligible for a fee waiver - meaning you would not have to pay the filing fee at all - your income must fall below 150% of the poverty line for your state and household size. Being eligible to apply for a fee waiver doesn't mean that you will automatically get it. The bankruptcy court will review your fee waiver application and decide if it's appropriate in your case.
If your fee waiver is denied, the bankruptcy court will typically give you the chance to pay the filing fee in installments based on a set payment plan. Up to four installment payments can be made, depending on the terms of the court's order.
If you can't pay the entire Chapter 7 bankruptcy filing fee and you don't qualify for a fee waiver, then you can apply to pay the court fees in installments. Generally, filers need to make their first installment payment with the filing of their bankruptcy petition. All installment payments must be paid within 120 days after bankruptcy filing. If the bankruptcy court approves your application, the payment due dates will be listed in the court's Order Approving Payment of Filing Fee in Installments.
Bankruptcy Attorney Fees
Depending on your case, the total cost of filing bankruptcy might include attorney fees. Know that you always have the right to for bankruptcy protection pro se - on your own without a bankruptcy attorney. And our free online tool helps qualifying, low-income filers through the bankruptcy process. However, no matter your situation, it isn't a bad idea to meet with a bankruptcy lawyer for a free consultation.
Flat fees vs. Hourly Fees
Most attorneys handle Chapter 7 bankruptcy cases on a flat fee. This means that they charge a set amount up-front for the legal services involved in preparing and filing a Chapter 7 case. An attorney/client agreement should list what legal services the flat fee covers and explain what happens if a situation arises in your case that is not covered by the flat fee. The benefit to the flat fee option is that barring unforeseen situations you'll know from the start exactly how much your bankruptcy attorney fees will cost. The alternative to charging a flat fee is charging an hourly fee. The hourly rate should also be included in a written agreement between the attorney and client. It's possible, but rare, for a bankruptcy law firm to bill hourly attorney fees for filing a Chapter 7 consumer bankruptcy.
Amount of Attorney Fees
Flat fees for filing bankruptcy can vary greatly depending on the complexity of your case. For example, owning property, having a lot of unsecured debt, recently acquired credit card debt, or having high income can increase attorneys' fees in a Chapter 7 case. To give you an idea of what you might pay, the national average for Chapter 7 attorney fees is somewhere around $1,500. Certainly, attorneys' fees plus the filing fee can seem like a lot, but don't let the potential cost of bankruptcy deter you from getting the fresh start that you deserve.
Most filers don't have to come up with the bankruptcy fees all at once. Just as the bankruptcy court sometimes allows installment payments for the filing fee, most bankruptcy attorneys allow installment payments for the attorney fees. Though it's important to understand that bankruptcy attorney fees for Chapter 7 cases must be paid in full before the attorney files the case. This is because of the automatic stay, which stops your creditors from attempting to collect on a debt you owe them. If you owe your bankruptcy attorney money at the time of filing, they become one of your creditors and it would be illegal for them to try to collect payment from you. Then, so long as you receive a bankruptcy discharge of your debts, your attorney would never legally be allowed to bill you or otherwise try to collect payment.
Costs of a Chapter 13 bankruptcy
Chapter 13 bankruptcy is the other type of bankruptcy that consumers use to get immediate and lasting debt relief, this time through a reorganization rather than a liquidation. Folks in a Chapter 13 must have a certain amount of disposable income, so there are fewer opportunities for waivers.
Court Filing Fee
The Chapter 13 bankruptcy filing fee is $310.00. Fee waivers are generally not available in Chapter 13 cases. The fee waiver application form is specific to Chapter 7 filings; however, the application to pay the filing fee in installments can be used in any type of bankruptcy.
Chapter 7 and Chapter 13 bankruptcy cases operate differently from one another. A Chapter 13 case requires a 3 to 5 year repayment plan, which mostly depends on the filer's income. Chapter 13 cases require that the filer have disposable income to make monthly plan payments to the trustee. This means few, if any, individuals who are eligible for a fee waiver would file a Chapter 13 bankruptcy. Further, getting a fee waiver requires that the filer be unable to pay the filing fee. Not being able to pay the filing fee would make it hard for the court to believe that a Chapter 13 repayment plan can be proposed in good faith.
Bankruptcy Attorney Fees
Attorney fees for a Chapter 13 bankruptcy tend to be more expensive than attorney fees for a Chapter 7 bankruptcy case. There's a much greater workload associated with filing a Chapter 13 case. Unlike Chapter 7 bankruptcies, which usually take around four months to complete, Chapter 13 cases are open for 3 to 5 years. Plus, Chapter 13 bankruptcies are more complex and must include a proposed repayment plan specifying which creditors will be repaid and by how much, which requires court approval.
It isn't necessary to pay all of the attorney fees upfront in a Chapter 13 case as it is in a Chapter 7 case. Usually, a Chapter 13 bankruptcy lawyer will require a portion of the attorney fees be paid before filing the case. The remaining attorney fees will get paid through the Chapter 13 plan. The filer will make a monthly payment to the trustee, who will then make payments to the filer's creditors – including their attorney who filed the case. Outstanding attorney fees at the time of filing are not paid in addition to the plan payment, they're part of the plan payment. Lawyers can ask for priority to receive full payment before certain other creditors. This helps attorneys be more willing to file Chapter 13 cases before full payment of attorney fees because it minimizes the risk of not being paid if the filer later stops making plan payments.
A lot of attorneys use the flat fee system for attorney fees in Chapter 13 bankruptcy cases, too. Many bankruptcy court districts have "no look" fees, which are flat fees attorneys can charge for filing Chapter 13 cases that the court presumes are reasonable and don't require a fee application. Some attorneys handle Chapter 13 cases on an hourly basis, but they typically have to submit a detailed fee application to the court. Whether flat fee or hourly, all attorney fees paid through the Chapter 13 plan are subject to court approval.
Costs for Credit Counseling
The courses filers are required to complete and the companies offering these courses are the same for both Chapter 7 and Chapter 13 cases.
Everyone who files for bankruptcy must take two educational courses:
A credit counseling course must be taken before filing.
A debtor education course must be completed after filing.
The purpose of mandatory credit counseling is to help you explore if bankruptcy is the right debt relief solution for you. The second course, debtor education, is a mandatory two-hour course in personal financial management designed to teach strategies on handling finances after bankruptcy. Both courses can be completed online and generally are inexpensive and not too time-consuming.
The costs of either course can't exceed $50 unless the provider gets a special exemption from the U.S. Trustee's Office. The courses must be taken through approved providers and the cost will depend on which provider is chosen. The U.S. Trustee Program maintains a database of approved credit counseling agencies by state and a list of approved providers of debtor education. Approved credit counseling agencies are required to operate as nonprofit entities, so the cost tends to be slightly lower for the first course than the second course. Generally speaking, you can expect to pay less than $25 to complete credit counseling and less than $50 to complete debtor education.
Other Bankruptcy Costs
There are a few other costs that arise when filing bankruptcy, though they’re typically in the form of printing costs or travel expenses. Here is a brief overview of some of the most common additional costs associated with a bankruptcy filing.
A bankruptcy case requires a lot of paperwork. The bankruptcy petition is usually over 60 pages. Depending on your district, it may be necessary to print multiple copies. Plus, copies of documents need to be sent to the trustee. The printing costs of this paperwork can add up, especially if you don't own a printer and need to pay a printing and copy service per page.
Other bankruptcy costs can include mailing documents to the court or bankruptcy trustee, mailing notices to creditors accidentally left off your original filing and added later, fees to file amendments, travel to and parking for the Meeting of Creditors, and possibly lost wages for time off work to attend that meeting.
Between court filing fees, attorney fees, and other expenses that arise, the average cost of filing a Chapter 7 consumer bankruptcy is around $2,000 and the cost of filing a Chapter 13 much more. While an inability to pay debts as they come due doesn't necessarily mean a person can't pay for these costs, many people who need debt relief simply can't afford to file.
That's why there's legal help for people who would benefit from bankruptcy but aren't in a position to pay hefty fees. Filers with income below 150% of the poverty line for their state and household size are eligible to apply for a filing fee waiver. And Upsolve can help alleviate a large portion of the total cost by helping people file Chapter 7 bankruptcy without the help of an attorney – subject to eligibility. Upsolve’s free web app enables filers to prepare their bankruptcy forms without the help of an attorney and provides a number of free resources and information about how to navigate the Chapter 7 bankruptcy process. Check out Upsolve's how we work to explore if our web app is the solution for you.