Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.
Updated on Friday, November 9, 2018
There are few mandatory costs of filing for bankruptcy, but they add up. The major expenses you’ll have to budget for are court, attorney and counseling fees.The fees you pay will depend on a host of factors, including where you live, the assets you own and whether you choose to file Chapter 7 or Chapter 13 bankruptcy.
How much does it cost to file bankruptcy?
In Chapter 7 bankruptcy, a trustee sells off nonexempt assets (such as a second home, cars you don’t use for work, etc.) to settle your debts. After this, your remaining unpaid debts are discharged. Chapter 13 organizes your debts into a three- to five-year plan to repay some or all of your debts, and it generally lets you keep assets you could lose in a Chapter 7 filing. Both types of bankruptcy result in most, if not all, of your remaining debts being discharged. You can learn more about the detailed differences here.
Now, to the costs. The fees mentioned in this piece are accurate as the date of publishing.
The court fees for Chapter 7 total $335, while filing for Chapter 13 costs $310. The total amount you pay consists of a filing fee, administrative fees and, if you file Chapter 7, a trustee fee. The filing fees are the same nationwide.
|Chapter 7||Chapter 13|
Beyond court fees, you’ll need to pay an attorney, which will make up the bulk of your bankruptcy expenses. The amount you will pay can vary greatly, from hundreds to thousands of dollars. The attorney’s bill will depend on factors such as your local laws, what type of bankruptcy you file and the attorney’s rates.
Where you file for bankruptcy in the country may determine your starting point when budgeting for an attorney. For Chapter 13 filings, the court in each jurisdiction generally sets flat-rate attorneys fees referred to as “no-look” fees.
The fee is “presumed to be reasonable no matter what’s involved in the filing,” said Bob Drummond, the Chapter 13 trustee for the district of Montana. Drummond said more than half of U.S. districts have set no-look-fee thresholds, and the fee varies by district. You can check with your district court to find out if they have a no-look threshold.
The court must approve attorney fees in Chapter 13 filings unless they fall below the no-look amount or the district hasn’t set a no-look threshold. If an attorney charges a rate below the district’s no-look threshold, they don’t have to get the court’s approval. But if they want to charge above the threshold — for example, if they want to charge more for a complex case that will take a lot of their time — the attorney must submit a fee application.
Type of filing
The attorney fee will also vary by type of bankruptcy filing. “There is going to be regional variation, but I think it’s fair to say Chapter 7 is inherently cheaper than Chapter 13,” said John Colwell, president of the National Association of Consumer Bankruptcy Attorneys.
“Chapter 7 is quicker, cleaner [and] faster and therefore … less expensive, generally speaking. With Chapter 13, not only is the debtor in there for three years, four years, five years, but so is the lawyer,” Colwell said. Besides time spent, Colwell said the increased responsibility and liability a lawyer takes on in a Chapter 13 filing compared to a Chapter 7 filing contributes to the higher bill.
As far as an attorney’s experience factors into cost, Colwell recommends you don’t cut corners to save money.
“When you are shopping for a bankruptcy attorney, you want to look for the best you can afford,” Colwell said.
Colwell recommended shopping around and vetting an attorney before you decide on one. Ask about their track record in bankruptcy cases and why they lost cases — if they have lost any. Colwell advised you also check with organizations such as the Better Business Bureau to see the business’ rating and reviews. If you consider a lawyer based on a referral, ask the person who referred you any questions you might have.
When the attorney is paid
Attorneys involved in a Chapter 7 bankruptcy usually require upfront payment. If their pay becomes a debt due after the bankruptcy filing, it may be discharged and they might not get paid.
With Chapter 13 filings, the attorney may require you to pay some of their fee upfront, and they will generally allow you to pay the remaining amount through your monthly payments in the court-approved repayment plan.
Regardless of what type of bankruptcy you elect, you must complete two rounds of counseling as part of the process.
You must complete pre-bankruptcy credit counseling within the 180 days before filing for bankruptcy, and it ranges from $10 to $50, depending on where you live.
The court also requires you to complete a post-bankruptcy debtor education course after the petition to discharge your debts. The post-bankruptcy debtor education course fee will likely cost between $50 and $100, depending on where you live.
If you are unable to afford the counseling fee, you can ask the counseling organization for a fee waiver before starting the session. You must complete the counseling with an organization approved by the U.S. Trustee program. You can find a list of approved credit counselors here and a list of approved debtor education counselors here.
Other associated costs
Aside from the standard fees mentioned above, other expenses may increase the cost of bankruptcy. Here are some extra costs that Colwell and Drummond said you might encounter:
- Credit report: Your attorney may charge a fee (about $30 to $60) to pull your complete credit report.
- Tax transcript: Your attorney may charge a fee ($10 to $20) to pull your tax transcript from the IRS.
- Credit repair: Some law firms offer post-bankruptcy credit repair services (the fees vary).
- Conversion fee: If your case is converted from Chapter 13 to Chapter 7, you must pay a $25 fee.
- Adversary proceedings: An adversary proceeding is a case within bankruptcy court. An adversary proceeding may occur for various reasons, including anytime a creditor, spouse or other affected party challenges your bankruptcy case and requests to be exempted from the discharge. Generally, your lawyer must appear in court to defend you in an adversary proceeding and will bill you for it.
- Showing up in court: If you have to show up in court and your lawyer has to be there with you, they will likely charge you an additional attorney fee. For example, in a Chapter 13 filing it may take more than one attempt to get your repayment plan confirmed by the court. Each time you try, your lawyer will need to be present.
Reducing the cost of filing for bankruptcy
Filing for bankruptcy can be expensive. On the bright side, there are a few things you can do to help reduce your cost of filing.
Court fee waivers
Those who may not be able to afford the full $335 associated with filing a Chapter 7 bankruptcy may qualify for a fee waiver. You must fill out an application to waive the Chapter 7 fee.
Waivers are generally not available for Chapter 13 cases, Drummond told MagnifyMoney.
“The reason we don’t see [waivers] as much in a Chapter 13 case is because you have to have income and the ability to make a plan payment,” Drummond said. “If they can do that, they probably have enough income to pay the filing fee, too.” Chapter 13 court fees can generally be paid in installments, described below.
Paying court fees in installments
In either a Chapter 7 or Chapter 13 filing, the debtor can file an application with the petition asking to pay the filing fee in installments. The debtor must propose an installment schedule, and the fee may be paid in up to four installments. When you submit the application, the budget included in your bankruptcy petition must justify your need to pay the court fees in installments.
If you don’t have the funds for a bankruptcy attorney, you may consider looking into pro bono services. There may be an organization in your state that offers pro bono legal services. The Montana Legal Services Association, the Consumer Bankruptcy Assistance Project’s Fresh Start Clinic in Philadelphia and the New York City Bankruptcy Assistance Project all offer pro bono help for Chapter 7 filings for eligible clients.
You can find a list of pro bono resources, compiled by the American College of Bankruptcy Foundation, here. You can also search for organizations that provide pro bono legal services on Pro Bono Net.
DIY (pro se)
You could also forgo an attorney and attempt to complete a bankruptcy filing on your own, but the experts told MagnifyMoney they wouldn’t recommend it.
“Sure you can file pro se. Do I advise that you do it? Hell no. Double hell no,” Colwell said. “The paperwork is extremely complex, and there are even attorneys that don’t file bankruptcy because they think they might screw something up.”
Drummond told MagnifyMoney that pro se cases are more likely to get dismissed or run into issues with assets, resulting in the debtor losing assets they wouldn’t have had they consulted with an attorney.
“In the long run, they may end up saving more money if they hired counsel than if they didn’t,” Drummond said.
If you are elderly, disabled or a retiree, you may not need to file for bankruptcy at all, as you may be considered “judgment proof” or “collection proof.” That means even if your creditors tried to collect and sued you, they wouldn’t be able to collect because your retirement, Social Security or disability income may be exempt from collection. If you have a large asset such as a home, however, the creditor could place a lien on the property, which may pop up if you decide to sell the asset. Consult with an attorney to verify if you are judgment proof.