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How much does Bankruptcy cost, and how am I supposed to pay for it?

 

As with most other questions, the answer here depends on many factors, the most important of which is what type of bankruptcy you are filing. Chapter 7 costs the least (except for very complicated cases), but is the riskiest. Chapter 13 costs a lot more than most Chapter 7 cases, but Chapter 13 can be a much safer process (assuming you can afford to make the payments), and it is usually the right thing to do if you are trying to save a house or a car, or if your primary problem has to do with income taxes and/or child support. If you have to ask how much Chapter 11 costs, you can't afford it.

The changes brought on by the new bankruptcy laws have made bankruptcy more expensive than it used to be. (You can thank your representatives in Congress for that.) The filing fee for a Chapter 7 has gone up to $335.00, and for a Chapter 13 it is now $310.00. 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 filing fee for Chapter 11 is $1,717.00.

The attorney fee for a Chapter 7 is usually between $1,000.00 and $1,500.00, depending on how complicated the case is. Some newer attorneys and high-volume attorneys do charge less, but as with most things, you get what you pay for. For business cases and other complicated situations, the fee could be much 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 Chapter 7 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 may be other options, such as having a responsible co-signer, but for the most part you need to think in terms of paying all or more Chapter 7 fees in advance.

Note: For people in truly desperate situations, I can and often do reduce or eliminate my fee in Chapter 7. We can sometimes get both the filing fees and the credit counseling fees waived for people who are below a certain level of the federal poverty guidelines. This is reserved for people with no significant assets, little or no income, and little or no chance of improving their income in the near future. As a practical matter, this usually means people who are elderly and/or disabled. There is no such thing as a reduced fee in a Chapter 13 case.

The attorney fee for the standard Chapter 13 case is $3,000.00, which is the amount that any lawyer in this area would charge. 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. When we calculate your plan payment, it will include as much as $50 per month for the attorney fees. Also, in most cases I give you an extra $100.00 of credit for every $200.00 that you pay up front. For instance, if you pay the first $200.00 of the attorney fee before the case is filed, you get an extra $100.00 worth of credit, so the remaining balance to be paid through the plan is only $2,700.00. If you pay $2,000.00 in advance, you get another $1,000.00 of credit, and my fee is therefor 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. (Note: This discount only applies if we have at least one week to prepare your plan, and if you have not had a case dismissed within the past year.)

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). We prefer that you do that on your own, but if necessary we can help you make contact with one of the approved agencies. Either way, that fee has to be paid in advance. The cost for the pre-filing credit counseling can be anywhere between $10 and $50. The company that only charges $10 per person can be found at www.CCAdvising.com, but they have a slower turn-around time, so don't use them if your case needs to be filed right away. Also, be aware that the lowest fee only applies for people who are taking the course online using a desktop or laptop computer. For unknown reasons they charge a lot more for people using a phone or a tablet. People who are in a hurry or who would rather not take the course online should call Kingdom Ministries at 901-552-5131 and take their over-the-phone course for $30. They will often get it done in just a few minutes. Again, that must be paid with a debit card.

The new law also requires every debtor to go through a second course, called "financial management" or "debtor education," before your case ends. This is different from the credit counseling mentioned in the previous paragraph. The cost for this second course is also in the $10 to $50 range. For a complete (but not necessarily current) list of approved agencies, go to the following link, select Tennessee from the first drop-down list, and scroll down to the section that says "Western District of Tennessee."

http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm