People filing for bankruptcy are struggling to pay their debts. Find out what type of costs to expect for Chapter 7 bankruptcy and who pays for it if you can’t.
Written by Upsolve Team.
Updated July 22, 2020
Does The Government Pay for Bankruptcies?
Many people who find themselves in crippling debt seek bankruptcy protection for much needed financial relief. Filing Chapter 7 bankruptcy provides you with a fresh start so you can get back on track after having fallen into too much debt. But even though you may have more debt than you can handle, unfortunately, bankruptcy doesn’t come free. And while you’re seeking financial freedom through filing for bankruptcy, you may be wondering who exactly pays for bankruptcy? Does the government pay for it? Do taxpayers pay for it? Do you personally pay for it? And, importantly, how much is it?
Before we can answer who exactly pays for bankruptcy, we need to first understand the types of costs involved.
What Sort of Fees and Payments are Involved in Bankruptcy?
When filing for bankruptcy, there are filing fees and other miscellaneous costs involved. Your out of pocket costs can vary greatly, depending on whether you hire a lawyer and whether you’re eligible to have the court filing fee waived.
Out of pocket expenses for both Chapter 7 and Chapter 13 bankruptcies include:
Filing fee: It costs $335 to file for Chapter 7 bankruptcy and $310 to file for Chapter 13 bankruptcy.
Credit counseling fee: When filing for bankruptcy, you must first receive credit counseling. Most credit counseling services are fairly low-cost, with offers ranging from $10 - $50. If you aren’t able to afford credit counseling, you should speak to the agency about your situation to see if the fee can be waived for you.
Debtor education course: After you file for bankruptcy, you will be required to attend a debtor education course. The cost of this course can range from $15 to $50. Again, if you’re unable to afford this, you may be able to get the cost lowered or waived completely.
Attorney fees: If you hire a lawyer, you will have to pay the lawyer for their time and expertise. Most Chapter 7 bankruptcies are handled on a flat fee basis. This means you will know how much your total attorney fee will be at the outset and won’t have to worry about getting a big bill at the end of the case.
So Who Actually Pays for Bankruptcies?
The person who files for bankruptcy is typically the one that pays the court filing fee, which partially funds the court system and related aspects of bankruptcy cases. Individuals who earn less than 150% of the federal poverty guidelines can ask to have the fee waived. In that case, the Bankruptcy Court essentially picks up the tab by absorbing all related expenses to ensure the person receives all required services to successfully complete their bankruptcy case. Since that places a significant burden on the courts, fee waivers are only granted when it is clear that the person simply can’t afford to pay the filing fee even after the case is filed and debt no longer has to be paid. If your court filing fee is waived you can often obtain a waiver for the credit counseling and debtor education courses as well. Folks who wish to hire a lawyer to help them with their case are responsible for paying the lawyer. Keep in mind, however, that you can file bankruptcy without a lawyer if you can’t afford to hire one.
How Upsolve Can Help
Upsolve is a non-profit legal aid organization that helps low-income individuals reach financial freedom by filing for bankruptcy. Our services are completely free for qualified individuals. Our free online tool helps you prepare all the forms you will need for your bankruptcy and guides you through the process step by step. Additionally, your paperwork is reviewed by a lawyer before you submit it to the Court to make sure everything is in order. If you aren’t eligible for our free services, we still want to help! We can connect you with a bankruptcy attorney in your area that is transparent about their fees and services. Most of them will meet with you for free to discuss your situation, your options, and ways you might be able to afford to pay for their services even though it may not seem like it from where you’re sitting.