It’s a classic trap: you are in a difficult financial situation and you have to deposit bankruptcy. But between the filing fee and the cost of hiring the right bankruptcy lawyer, you could end up paying hundreds or even thousands of dollars to do so.
Here’s what bankruptcy costs – and how to pay it.
How much does it cost to file for bankruptcy?
There are two expenses that you will face: court filing fees and the bankruptcy attorney’s fees to file your petition, help you pass the means test, and represent you in court.
The most common forms of consumer bankruptcy are Chapter 7 Bankruptcy, where most of your debts will be forgiven; and Chapter 13, which reorganizes debt into a repayment plan and can reduce what you owe while still allowing you to keep key assets.
* Legal fees vary widely; these are approximate ranges.
File fees are the same nationwide, but attorney fees vary depending on your location, the complexity of your case, and the lawyer. In general, they will be lower if you live in a rural area or have a simple case. However, a complex Manhattan bankruptcy case will likely cost several thousand dollars.
If you file for Chapter 13 bankruptcy, your court will review your attorney fees unless they fall below the so-called “no review” level that is recognized as reasonable. This level varies from district to district, so check with your local court before hiring a lawyer.
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How to pay bankruptcy
Chapter 13 filing means you have the financial basis to structure a repayment plan for your debts – including attorney fees – after your filing.
But if you’re in financial difficulty enough to file Chapter 7, you’ll likely have to pay your attorney before he or she files your case. If you can’t afford these fees, you can:
Make a payment plan before you deposit
Volunteer, which means finding a lawyer who will take charge of your case for free
The first option requires creativity and hard work. Others require you to prove your financial needs, so gather proof of your income and expenses, as well as your tax returns, before meeting with legal counsel.
1. Collect money
A few simple steps can help you free up or find the money for your bankruptcy.
First: minimize your cash outflows. “If you’re still paying your credit cards, stop paying them,” says New Jersey bankruptcy attorney John Hargrave. “You’re just throwing that money away if you’re going to deposit. Save that money and pay it to your bankruptcy. “
Unsecured debts, such as credit card bills, are wiped out by Chapter 7 bankruptcy, so it makes little sense to continue paying them if you are sure you are using it. debt relief option.
If you’ve ever pawned your flat screen and started a dog walking service, but still don’t have enough to cover your bankruptcy, try asking your family and friends for help.
2. Make a plan
You may be able to split the attorney fees and the filing fees.
The first step is find the right lawyer. In this case, that means someone who has expertise, is a good communicator, charges a fair price – and is prepared to receive payment over time. Ask any lawyer you are considering about this possibility when you first meet.
Payment plans vary; some lawyers allow you to spread payments over six months, others over three months. Most will want payments made before you file your case: Since Chapter 7 bankruptcy wipes out most of your debt, you wouldn’t be legally obligated to pay your lawyer the unpaid fees after you file. It is simply not a sustainable business plan.
But you can still get benefits even while you’re making the payments, says Hargrave. Once you have officially hired a lawyer, he or she can take calls from creditors on your behalf. When discussing establishing a payment plan, ask how much fees you have to pay before the lawyer starts taking calls.
“When people hire a bankruptcy lawyer, they experience the fear of going to the mailbox, the fear of the next phone call that evaporates when you hire a lawyer,” says Hargrave. “It’s a huge benefit for people.”
Later, your attorney can work with the court to set up a payment plan for your bankruptcy filing fees. The $ 335 fee can be split into four payments.
3. Go Pro Bono
You may be eligible for free legal services or a fee waiver if your income is below 150% of the poverty line for your family size and you cannot afford a payment plan.
There are several ways to find a pro bono lawyer. First, ask your local bankruptcy court for information about free legal clinics and free local legal aid Resources. If you follow their guidelines, these organizations may be able to help or put you in touch with pro bono bankruptcy lawyers. But be prepared: Legal aid organizations are often underfunded and overworked. Nonetheless, it’s wise to get on the waitlist with one while you continue to research other options.
The National Association of Consumer Bankruptcy Lawyers has a research tool to help you find lawyers in your area.
You can also contact the bar in your state. Some companies require lawyers to perform pro bono work for 10-15% of their workload. But don’t choose a lawyer just because he or she is free.
Finally, you can hire a petition preparer instead of a lawyer if you are in a rush to file. He or she will help you complete your paperwork for an hourly rate that can be as low as $ 70. A petition preparer can’t give you the legal advice a lawyer can provide, but it’s an option if you just want to file for bankruptcy in order to trigger the “automatic stay” that stops collection efforts.
What about DIY?
If you plan to file on your own, without any legal assistance, Hargrave has a tip: don’t.
“There is a danger in going bankrupt on your own,” he says. “Even if you are a well educated and articulate person, the law still contains a lot of jargon and technical stuff that you could, without the help of a lawyer, screw up.”
Only about 1.4% of Chapter 13 bankruptcy cases filed in 2012 without a lawyer were discharged, meaning the cases were resolved and debts forgiven, according to federal bankruptcy data.
Making a mistake in your paperwork can cause the court to dismiss your case, wasting the effort and money you put into it.