How much does Bankruptcy cost, and how am I supposed to pay for it? (Updated 12/2/05)

For most people it doesn’t cost as much as you might think, but some of the changes brought on by the new bankruptcy laws have made it more expensive than it used to be.  (You can thank your senators and congressmen for that the next time you go to the polls.)  The filing fee for a Chapter 7 has gone up to $274.00, and for a Chapter 13 it is now $189.00. That money goes to the court clerk.  The filing fees do not absolutely have to be paid in advance, but I do strongly recommend it.

The attorney fee for a Chapter 7 is usually between $1,000.00 and $1,500.00, depending on how complicated the case is. If the case is going to be very complicated, the fee might be even higher. The attorney fee in chapter 7 has to be paid in advance, because of the way the law is structured. In other words, if I don’t get paid before the day your case is filed, then your debt to me is discharged along with all of your other debts. If you absolutely cannot pay all of the chapter 7 fees in advance, then there is one other option. We can set up a short-term payment plan if a responsible person co-signs for you.

The attorney fee for the standard Chapter 13 case is $2,400.00. In most cases all or part of that can be paid through the Chapter 13 Plan. In other words, I will be treated just like one of your creditors, getting a little bit of money every month. Also, in most cases I give you an extra $50.00 of credit for every hundred dollars that you pay up front. For instance, if you pay the first $200.00 of the attorney fee, you get an extra $100.00 worth of credit, so the remaining balance to be paid through the plan is only $2,100.00. If you pay $1,600.00 in advance, you get another $800.00 of credit, and my fee is paid in full. Of course, most people are not able to do that, but there are times when you can save yourself some money by paying up front.

The new law also requires every debtor to go through credit counseling through an approved agency before the bankruptcy case can be filed. (For a list of approved agencies, go to the link at the end of the next paragraph). You can either do that on your own, or we can hook you up with one of the approved agencies through my office. Either way, that fee has to be paid in advance. As of the day this is being written, the cost for the pre-filing credit counseling is running $50 to $60, but that could go up or down in the future.

The new law also requires every debtor to go through a financial education class before your case ends. This is different from the credit counseling mentioned in the previous paragraph. We believe that the cost for this will also be in the range of $50 to $60, but that could change, too. Some of these agencies are offering package deals, giving a slight discount if you pay for both the credit counseling and the financial education class at the same time. We do not yet know if that is a good idea, so at this point we are recommending that you only pay for one thing at a time. For a list of approved agencies, go to the following link, and scroll down to the section that says "Western District of Tennessee." http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm#TN