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Can I Afford to File Bankruptcy?

Couple at Table Discussing if They Can Afford to File Bankruptcy

Bankruptcy almost always comes on the heels of mounting debt or financial crisis. That means there isn't much money left to go toward court costs, attorney fees, and other expenses related to the bankruptcy process. In the face of monthly payments, creditor calls, and mounting expenses, you might be left wondering, "Can I afford to file bankruptcy?"

In this blog post, I will review the filing fees associated with Chapter 7 and Chapter 13 bankruptcy. I will explain how bankruptcy attorneys set and receive their attorney fees, and what other costs you can expect so you can decide if you can afford to file bankruptcy.

How Much Does It Cost to File Bankruptcy?

Every case in the Bankruptcy court comes with certain filing fees and court costs that must be paid at the time the case is filed. The filing fees are different depending on whether you qualify for a Chapter 7 or Chapter 13 bankruptcy. These court filing fees apply to every case, whether or not you hire an attorney to help you, so they are important to deciding if you can afford to file bankruptcy. When you or your bankruptcy attorney head to the courthouse, you can expect to pay:

Chapter 7 Total Filing Fees: $335

  • $245 Initial filing fee
  • $75 Administrative fee
  • $15 Trustee surcharge

If you are re-opening a Chapter 7 filing, your filing fee will be $260. There is no additional fee if you file your bankruptcy under Chapter 7, but it is later converted to a Chapter 13 (because you have too many assets or too much income to qualify).

Chapter 13 Total Filing Fees: $310

  • $310 Initial filing fee
  • $75 Administrative fee

If you are re-opening a Chapter 13 filing, your filing fee will be $235. If you file for Chapter 13 bankruptcy and it is later converted to Chapter 7 (because you fail to meet payment plan), you will be charged a $25 conversion fee.

In both Chapter 7 and Chapter 13 bankruptcies, you will also be required to complete two credit counseling courses. While you can sometimes find free courses that qualify, in other cases these courses will cost up to $50 each.

How Much Does a Bankruptcy Attorney Cost?

In deciding if you can afford to file bankruptcy, you will also want to decide whether you have the budget to hire an attorney to help you. Bankruptcy attorney fees vary based on:

  • Whether you own a business
  • Where you live
  • How many creditors you have
  • How much money you make compared to the average in Michigan (or your state)
  • If you have filed bankruptcy in the past
  • If there are court cases involved (like a mortgage foreclosure, collections lawsuit, repossession, or bank levy)
  • If you have non-dischargeable debt (like student loans or child support)
  • Your attorney's experience
  • The size of your lawyer's firm

A Chapter 7 bankruptcy attorney could charge between $500 and $3,500. Because a Chapter 13 bankruptcy takes longer and may involve more hearings, attorney fees in those cases are often higher, averaging between $2,500 and $6,000. If you are looking to keep attorney fees down, you may want to opt for a smaller law office, rather than paying a big firm that spends a lot of money on advertising.

When Do I Need to Pay My Bankruptcy Attorney?

When your attorney gets paid also depends on the type of bankruptcy involved. Most bankruptcy lawyers will require up-front payment in Chapter 7 cases. However, if you have a reliable source of income, like wages or social security payments, your attorney may be able to take a portion of the fees up front, and arrange a payment plan to cover the rest.

Chapter 13 attorney fees may cost more, but in many cases, you can spread those payments out over the three to five years your case is pending. That's because Chapter 13 sets up a payment plan for many of your creditors at a rate your income suggests you will be able to afford. As you make payments to your bankruptcy trustee, the trustee distributes those payments among your creditors, including the attorney.

What Am I Paying For With My Attorney Fees?

When money is tight, it may be hard to believe you can afford a bankruptcy attorney on top of bankruptcy court costs. You need to consider those attorney fees as an investment into your financial future. An experienced bankruptcy attorney knows the bankruptcy code, along with local court rules and systems. She will make sure your bankruptcy paperwork is completed and filed correctly, so you can avoid re-opening fees.

A Chapter 13 bankruptcy attorney can help you stick to your payment plan, and can advocate on your behalf if life changes mean you need to alter the terms. Statistically, the chances of successfully completing a Chapter 13 bankruptcy are very low. Having a lawyer in your corner is nearly the only way to complete your Chapter 13 bankruptcy and protect your property.

Your bankruptcy attorney will also be your advocate with the bankruptcy trustee, court staff and bankruptcy judge, and with your creditors. He will make certain your Chapter 13 payment plan is likely to be approved, and can negotiate on your behalf to avoid creditor objections that lead to court time. A bankruptcy attorney can sometimes help to negotiate better terms for your bankruptcy. She can make the most of legal property exemptions under Chapter 7, so you can keep more of your property.

When you are trying to decide if you can afford to file bankruptcy, the thought of paying attorney fees can be intimidating. At John A. Steinberger & Associates, P.C., we are a full-service bankruptcy law firm in Southeast MI. We serve debtors and families in Southfield, throughout Metro Detroit, and in the surrounding communities. We offer low-fee Chapter 7 and no-money-down Chapter 13 bankruptcy to help you afford to file bankruptcy. Call us toll-free at (866) 690-2140 or contact us online to schedule a free initial consultation.

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