How Much Does It Cost to File Bankruptcy?

How Much Does It Cost to File Bankruptcy

Filing for bankruptcy is a hard decision, especially because the one who wants to do it has to spend money. If you are a person who plans to file bankruptcy, it is important for you to understand these costs so that you can decide whether or not filing bankruptcy is the right option for you. Make sure to keep reading the article to be informed about everything.

Types of Bankruptcy

According to Business Insider, there are a total of six types of bankruptcy. However, the most common ones include:

  • Chapter 7 bankruptcy

The first type of bankruptcy is called chapter 7 bankruptcy or a liquidation bankruptcy. This one refers to where you can pay off your debts by selling your assets. The money from the selling is given to creditors according to the priority of their claims. You are available to file this kind of bankruptcy if your income is under the median for your state. It will be needed for about four to six months for you to complete the entire process.

  • Chapter 11 bankruptcy

The second type of bankruptcy is called chapter 11 bankruptcy. This one makes it possible for certain individuals, corporations, or partnerships to restructure their debts while at the same time maintaining operations. In this kind of bankruptcy, the debtor will propose a plan of reorganization in order to make the business alive and to pay off their debts.

  • Chapter 13 bankruptcy

The third type of bankruptcy is called chapter 13 bankruptcy. This one is also referred to a wage’s earner’s plan. By choosing this type of bankruptcy, people who have regular income are able to reorganize their financial life and debts without having to sell all their assets.

Cost of Filing Bankruptcy

For anyone who is wondering how much filing for bankruptcy costs, the answer may vary, depending on several factors. However, in general it is as follows:

Types of BankruptcyCourt Filing FeesAttorney Fees

Credit Counselling Fees

Chapter 7 bankruptcy$338 (It is possible to be waived for eligible filers)$1,500 – $3,000$50 or less
Chapter 11 bankruptcy$1,738Around $18,000$50 or less
Chapter 13 bankruptcy$313$3000 – $5,000$50 or less

Factors that Influence the Cost of Filing for Bankruptcy

As mentioned before, the cost of filing for bankruptcy can vary, depending on some factors. For those who are curious about the factors that can influence the cost of filing for bankruptcy, they include:

    • Your financial situation
    • Type of bankruptcy you file
    • The complexity of your case
    • Whether or not you hire a bankruptcy lawyer
    • Etc.

Minimizing the Cost of Filing for Bankruptcy

There are several things that you can do to minimize the cost of filing for bankruptcy. If you are thinking of filing it without hiring a lawyer, you are suggested to forget it as it is not recommended to do it without the help from a lawyer as it can cause the mistakes to happen, increasing the chance of the court to dismiss the case. Instead, you can look for a pro bono lawyer. By hiring this kind of lawyer, you will be able to get a lawyer for free or for a small fee. If you want to find a pro bono lawyer, you can visit state bar associations and local or regional free legal clinics.

Advantages and Disadvantages of Filing for Bankruptcy

Before filling bankruptcy, it is better for you to weight its advantages and disadvantages, including:

Advantages:

    • Save you from having legal action being taken against you
    • Repossession of your car can be halted
    • Foreclosure on your home can be stopped
    • You are safe from creditors that are trying to collect payments
    • Your financial is fresh
    • There are some debts that may be fully discharged
    • Some debts allow you to pay less than what you owe

Disadvantages:

    • It costs a lot
    • You may have to be ready to lose some assets
    • You will still have to pay some debts
    • Your credit score will go down
    • It will be hard to obtain loans or credit in the future
    • You will get bankruptcy on your credit report for seven to ten years

Alternatives to Filing for Bankruptcy

If you think filing for bankruptcy has more disadvantages than advantages, you may want to consider some of the following alternatives:

Option 1: Debt settlement

Debt settlement refers to the option where you can negotiate the amount of debt that you can pay off to our creditor. The amount is usually lower than it should be. The process of negotiation can be done by you. Besides, you can also ask a third-party company that specializes in this process to do it for you. However, it should be noted that the creditor may not agree to the amount that you want to pay.

Option 2: Debt consolidation

Debt consolidation is described as an act of combining more than one debt into just a single debt. It is the best option, especially for those who have multiple high-interest debts and have a hard time keeping up with your monthly payments. By choosing this option, you will be able to save money on interest charges, making it possible for you to pay down your balance faster. Your debts can be consolidated by using a home equity loan or a personal loan.

Option 3: Balance transfer credit card

A balance transfer credit card refers to a thing where you are allowed to transfer your high-interest credit card debt that already exists onto a new card with a lower interest rate. The best balance credit cards should have a 0% introductory APR period that usually lasts for more than a year. By choosing this option, you will be able to save on interest costs, making it easier for you to pay your debt faster.

If you are interested in a balance transfer credit card, the first thing that you should do is to apply for the card. Once you have been approved, it is time for you to transfer the balances of your other debts to this new card. It is better for you to pay off as much of your debt as possible during the low-interest introductory period to save yourself from paying the transfer fees.

Option 4: Sell your belongings

In order to earn money that you can use to pay off your debts, you can sell your belongings that you no longer use or need. In addition to selling these items offline to your family members, friends, or other people, you can also sell them through popular online platforms such as Facebook marketplace, eBay, and OfferUp.

Option 5: Earn additional money

For anyone who needs a lot of money within a short period of time, one of the best ways that you can do it is to have more than one job. Some extra jobs that you can consider include working for Uber by providing rides, working for Rover by walking dogs, working for Taskrabbit by helping people with their household tasks.

Bottom Line

In conclusion, the cost of filing for bankruptcy may vary, depending on a few factors such as your financial situation, type of bankruptcy you file, the complexity of your case, the type of bankruptcy lawyer, and so on. The fees that you have to pay usually include filing fees, attorney fees, credit counselling, and so on. You are advised to consult with a bankruptcy attorney to estimate the costs of filing for bankruptcy and to explore any options that can reduce the fees.

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