The number one question people ask me when they consult with me about filing for bankruptcy is how much is this going to cost? My answer, as you can imagine, is that it depends on your specific situation. Not everyone has the same legal issues in every bankruptcy case. The more challenging the issues, the more expensive the case will be.
How much does Chapter 7 bankruptcy cost?
For a Chapter 7 case, which typically involves the complete elimination of all unsecured debt in a process that usually takes 3-4 months, on average will cost between $1,500 and $3,500. Cases involving primarily business debt or the potential wind down of a business should expect a fee in the range of $5,000—$7,500.
Currently, the filing fee for a Chapter 7 is $338 and all individual debtors must obtain a credit counseling certificate from an authorized credit counselor that typically will cost $35. This fee is required of all individual debtors for Chapter 7, Chapter 11 and Chapter 13.
What about Chapter 13 bankruptcy?
For a Chapter 13 case, which involves proposing a plan for repayment of all secured and unsecured debt, the typical fee charged is $4,500. This fee is higher than in a Chapter 7 because the attorney’s commitment to the case is for a longer period, usually 3—5 years.
Another difference between Chapter 13 and Chapter 7 is that, in Chapter 13, I do not require the full fee to be paid up front.
I typically ask for $500—1,000 up front depending on the facts of the case and the balance of my fee is paid in your Chapter 13 plan with a portion paid after your plan is confirmed and the balance paid monthly with your other creditors.
Also, unlike Chapter 7, you do not have to pay the filing fee up front in Chapter 13. The filing fee for a Chapter 13 is currently $313, but you can pay it in 4 monthly installments at the beginning of your case and it will be deducted from your regular monthly plan payment.
You should also know that you will have to pay a Chapter 13 Trustee a percentage of all of the money that he pays to your creditors. However, this is also paid as part of your regular monthly plan payment. Either way, the expense of a Trustee will need to be factored into your decision as to which case to file.
Costs of filing a Subchapter V Chapter 11
Lastly, there is the cost of filing a Sub V Chapter 11 to reorganize or liquidate your business. Typically, I require a minimum of $10,000 plus the filing fee of $1,738 to file a Sub V case. However, this is viewed as a retainer and not a flat fee, so there will be additional fees charged during the Sub V case. You should expect attorney’s fees to fall somewhere between $15,000 and $25,000, but again, the more complicated cases could end up much higher than this.
In addition to the attorney fees, Sub V Chapter 11 debtors should expect to escrow $1,000 per month for the Sub V Chapter 11 Trustee during the life of the case. Hopefully, the case won’t last longer than 4-5 months and you can budget for this expense accordingly.
Additional bankruptcy expenses to plan for
All of this is to say that it is important to know how much money you are going to have to get together to file for bankruptcy. It will take some time to gather the funds, and it is not uncommon for people to have to rely on family or friends to help them cover the cost of filing.
Just know that you should pay less up front for a Chapter 13 than a Chapter 7, but there are other costs associated with a Chapter 13 that you won’t have in a Chapter 7.
Why it’s important to plan ahead
You should consult with a bankruptcy lawyer as soon as you have an indication that you are struggling to make ends meet or your business revenue has seen a sharp decline. You don’t want to wait until the day before a foreclosure, eviction or repossession to consult with a bankruptcy lawyer only to find out that the cost of filing is more than you have at your disposal. You want to be prepared, and it is important to know the cost of filing ahead of time, so you can plan accordingly.
If you are struggling to pay your debts and concerned about the future welfare of you and your family, it is important that you seek the advice of a bankruptcy lawyer to ensure that your assets are protected and the debts you seek to eliminate are dischargeable.
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