If you’re struggling with debt, declaring bankruptcy can provide the debt relief you’re looking for. However, it’s not without its costs. If you’re considering filing for bankruptcy, you should first familiarize yourself with bankruptcy costs that filing bankruptcy will incur. Read on for a rundown of what you’ll need to pay in the bankruptcy process for Chapter 7 and Chapter 13 bankruptcies.
Types of Bankruptcy
Before discussing the costs of filing bankruptcy, it’s important to differentiate the types of consumer bankruptcy.
Chapter 7 bankruptcy is meant for debtors who don’t earn enough to repay their debts. By liquidating non-exempt assets, you’ll be able to repay qualifying debts and wipe out liabilities or discharged debts. To qualify, a debtor must pass the means test which compares their monthly income to the state median income. While it may seem counterintuitive, being unable to pay off your debts doesn’t necessarily mean you can’t cover the costs of bankruptcy.
Chapter 13 bankruptcy is similar to liquidation bankruptcy in terms of repaying your debts, but this is done through reorganization instead of liquidation. You can protect certain nonexempt assets you wish to keep, and debt repayment is done by making monthly payments according to a three-to-five-year repayment plan. As such, this type of bankruptcy is meant for high-income filers who can follow a long-term payment plan.
If you intend to file for bankruptcy but you’re unsure which type of bankruptcy is right for you, discuss your options with a reliable bankruptcy lawyer who is well aware of bankruptcy rules.
Your bankruptcy proceeding starts after filing your petition in bankruptcy. The bankruptcy court requires you to pay a fixed fee depending on which type you filed bankruptcy for. This includes:
- Chapter 7 or 13 filing fee;
- Administrative fee; and
- Trustee surcharge.
Reopening a bankruptcy case also has its fees. Check with the US Bankruptcy Court Miscellaneous Schedule for more information on filing fees. It’s also recommended to speak with a bankruptcy attorney to determine if you’re eligible to apply for a fee waiver.
Whether you’re filing for Chapter 7 or Chapter 13, the bankruptcy code requires you to attend pre-filing and post-filing courses. Note that you’re responsible for paying for these, which generally costs under $50.
Before filing your bankruptcy petition, you need to take a credit counseling course. Likewise, you should complete a debtor education course before you can receive your bankruptcy discharge. Make sure to take courses only from credit counseling agencies approved by the court.
Other Bankruptcy Fees
You may have to spend money on various parts of bankruptcy proceedings. For example, your bankruptcy petition may be several pages long, and some districts require petitioners to submit several copies, which incurs printing and service costs.
The bankruptcy trustee assigned to your case may also request you to provide additional paperwork, and you’ll be responsible for the mailing cost of sending these documents. Similarly, sending notices to your creditors may incur mailing fees.
You’re also required to attend the meeting with creditors, which means that you might have to pay for travel and parking, as well as lost wages if you have to take time off work. Having a bankruptcy petition preparer or hiring bankruptcy lawyers can help you save costs by making sure all the necessary documents are in order.
Bankruptcy filings may be tedious to some due to the amount of paperwork involved. Filling out bankruptcy forms can also be a challenge to complete without missing out on important details. While you can file bankruptcy on your own, it’s highly advised to get a bankruptcy attorney to avoid incurring additional costs for missing requirements and dealing with possible filing mistakes. Typically, a bankruptcy Chapter 7 case costs more than a Chapter 13, since the former takes around four to six months to complete while the latter takes three to five years and involves more complicated procedures.
Bankruptcy attorneys may charge either a flat fee or an hourly fee. Flat fees will vary depending on the complexity of bankruptcy cases and will cover only certain legal services. However, you’ll have an idea of the attorney fees even when unforeseen situations occur. Hourly rates, on the other hand, ensures that you’ll get the legal help you need whenever you need it.
If you’re considering bankruptcy, make sure to seek legal advice early on to avoid facing issues in getting your bankruptcy discharge. The correct bankruptcy information you acquire is essential so that you won’t commit mistakes that may be detrimental to your bankruptcy filing. If you’re considering bankruptcy in Maryland, call us today to schedule a free case evaluation with us at Grafton Firm, LLC.