Filing for bankruptcy is the last thing any business, corporation, or individual wants to do. Unfortunately, sometimes there is no other option. When you file bankruptcy, you essentially declare that you are unable to repay your debt or otherwise meet your financial requirements and commitments. The process can help you get debt relief and begin rebuilding.

It is advisable to talk to a bankruptcy lawyer to ensure a case runs smoothly and is compliant with the procedure. Need professional help to guide you as you file for bankruptcy? Hiring an attorney is the way to go.

Fees vary, as do other costs that come with this type of case. Here is a guide to all you need to know about chapter 7 bankruptcy and what you can expect to pay for legal services.

Types of Bankruptcy

There are several variations on the theme of bankruptcy- all working toward the same goal but taking slightly different routes. In total, there are six different classifications:

• Chapter 7 Bankruptcy: The most common type, also known as going into liquidation.
• Chapter 9 Bankruptcy: This is a form of debt re-payment plan for municipalities, such as schools, towns, and cities.
• Chapter 11 Bankruptcy: Not many people opt for this type of bankruptcy as the specifications are fairly unique. A corporation or person with a lot of debt and many valuable assets may prefer to reorganize them via chapter 11.
• Chapter 12 Bankruptcy: Farmers and Fishermen can file for chapter 12 bankruptcy to avoid having to sell everything they own. It works similarly to chapter 13 but is a bit more lenient, and the debt limits are higher.
• Chapter 13 Bankruptcy: The second most common bankruptcy case, chapter 13, is more of a payment plan that helps you hold on to your assets and get back on top of your debt.
• Chapter 15 Bankruptcy: International bankruptcy cases fall under chapter 15. Debtors from overseas can file an application via an attorney in the US bankruptcy court.

Each of these chapters offers a way out of the black for businesses and individuals whose finances are beyond repair. Monopoly may make bankruptcy seem simple, but it is not a “get out of jail free” card. There are consequences that come with filing for bankruptcy, especially under chapter 7.

What Is Chapter 7 Bankruptcy

Chapter 7 is a class of consumer bankruptcy that accounts for more than 60% of personal bankruptcy cases in the US every year. Essentially, it is the last resort when there is no possibility of ever repaying the debts owed by a business or individual. It works by liquidating any assets the debtor has to cover some of the money owed and providing relief for the rest of the unsecured debt.

How Is it Different from Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is less harsh than chapter 7 but equally serious. If someone earns too much to qualify for liquidation, they fall into this category. A payment plan through a chapter 13 bankruptcy case could be the answer.

The most common reasons for filing for chapter 13 are avoiding foreclosure on a home and earning too much to be eligible for chapter 7.

A chapter 13 bankruptcy case takes time and puts the debtor on a very short leash, but it does have fewer consequences than chapter 7. Let’s look at some of the prime differences between the two:

• Attorney fees are higher for chapter 13 because there is usually a lot more work involved.
• Chapter 13 aims to repay the most debt over time rather than wipe it out.
• Rather than qualifying based on income, anyone with debt below a certain amount can apply for chapter 13.
• Individuals are more likely to be filing for chapter 13, whereas businesses more often go for chapter 7.
• After seven years, chapter 13 is wiped from your credit report, whereas chapter 7 stays for 10 years.
• The chapter 13 process is long and difficult. It can take up to five years, whereas Chapter 7 bankruptcy filing is usually over in a few months. Because of this, a chapter 13 case is more likely to be dismissed due to failure to comply.

Filing for chapter 13 is the only option for those who have a higher income, but it often ends in dismissal. If you do not keep up with monthly payments, the assets you hoped to protect can end up laid bare. Any kind of bankruptcy should be an absolute last resort; that goes for both of these chapters. An attorney can better explain the alternative routes you can try.

What Qualifies a Person for Chapter 7 Bankruptcy?

Because so much unsecured debt is being wiped away, the state must agree that the debtor in a chapter 7 bankruptcy case is truly unable to repay the money they owe. All income is scrutinized and open for cross-examination and questioning from anyone owed money by the debtor.

Earnings are measured against the means test. This test compares a person’s income to the average income in that particular state. It then examines any disposable income or another source of funds and determines if there is any possibility for the debt to be repaid. If the belief is that there are simply not enough funds, they can begin officially filing for chapter 7.

What Is the Process for Chapter 7?

There are differences in the chapter 7 process depending on where the debtor lives. If you file bankruptcy, be sure to look for specific information related to your state. Primarily, the same level of asset protection is not permitted in all states.

In some areas, you may be forced to liquidate everything, whereas other states allow you some choice in what you keep. That being said, in more than 80% of cases, the debtor loses their home. On the other hand, around 60% were able to keep their cars.

How Much Does it Cost?

It may seem strange that it costs money to go bankrupt, but it does. On average, a chapter 7 bankruptcy costs between $1,000 and $2,000. There are exceptions. Sometimes, the fees can be as low as $500 or go as high as $4000. Because there are so many variables, it is hard to state exactly what you should expect to pay for filing a bankruptcy petition.

Going pro se is likely to cost less than hiring a bankruptcy lawyer, but it could take longer if anything goes wrong. Objections from creditors can draw out the process and rack up fees with or without an attorney, which is why you should go in well prepared.

Filing Fees

The filing fee is $338. When filing for chapter 7, this fee is due at the same time as your case enters bankruptcy court. Although there are many variable bankruptcy costs that come with filing a petition, this is one fee that remains the same regardless of the complexity of your case.

Fee Waivers

In cases where the debtor’s income is lower than 150% of the poverty line, it is possible to ask for a filing fee waiver (that applies to total household income). A waiver is granted if the court believes the debtor is incapable of paying the fee and that doing so could be detrimental to their wellbeing.

If you do not fall below 150% of the poverty line, this waiver is not available. However, because this type of case is often dealing with someone with extremely low funds, it is possible to pay it in installments over time.

Payment Options for Filing Fees

The most common way to pay the filing fee is with a money order. Cashier’s cheques are also a valid form of payment. You cannot pay using a bank card or a personal cheque linked to your account. Some states allow the fees to be paid in cash. The only requirement is that you provide the exact amount.

If you want to pay in installments, you fill out an application and find out how much of the fee your state requires to be paid upfront. After the application is accepted, you have 120 days to pay back the entire amount.

The repayment days are specified by the court and you must not miss any payment. If you do, you could risk having your case thrown out.

Other Fees

Aside from the filing fee and attorney fees, there are other miscellaneous costs involved in a bankruptcy filing. They include:

• Costs of printing documents and sending them via mail can add up over time.
• Traveling to and from the court, other set appointments, and visiting your attorney is not free.
• Bankruptcy counseling courses can be priced up to $50, but they are advisable and highly beneficial. Low-income debtors can apply for a fee waiver.
• Other post-bankruptcy courses to help you get back on your feet all come with a price, be it a small and worthwhile one.

When you are in a pit, every little fee can feel like a mountain. Knowing all the potential costs you may face helps to reduce the stress and allow you to get through the case a quickly and smoothly as possible.

Chapter 7 Bankruptcy and Lawyers

A bankruptcy attorney is an expert in all the legal proceedings involved with chapter 7. Using an attorney to help you get things moving is advisable, but not mandatory. Let’s look more into the reasons why using an attorney is beneficial and the fees you can expect to come with them.

Do You Need a Bankruptcy Attorney?

It is possible to begin filing for bankruptcy without an attorney. In fact, some people choose to go through the entire process pro se. Representing yourself can certainly reduce the price tag, but it may cost you in other areas. Self-help services may be a good place to start for anyone who feels they cannot afford the attorney fee.

There are legal aid apps and websites that can help you. Use of the site is often restricted to those who qualify for a filing fee waiver. Search how it works via listings on this site to find out more. If you plan to use this type of service and no attorney, make sure you are confident in every aspect of your petition.

Why Hire a Bankruptcy Attorney?

Bankruptcy attorneys can provide detailed insight into the best way to proceed. They can navigate the complexity of your case and smooth any possible bumps in the road. An attorney who specializes in bankruptcy knows everything that could come your way and can better prepare you for what is ahead.

Even if you decide to exercise your right to pro se representation in bankruptcy court, consider meeting with attorneys in your area at least once for some legal advice. If you still do not want to sign up as an attorney-client or confidential relationship, at least you have some expertise behind you before you launch your petition.

Of course, it is always beneficial to hire a bankruptcy lawyer whenever it is possible. If you have the means to pay the attorney fees and have the chance for professional representation, it is worthwhile.

By using a bankruptcy lawyer referral service, you can find a qualified attorney in your area zip code. Search for a reputable site, the attorney listings, and find one that matches your needs.

Some listings on the site are paid attorney advertisements.

Average Bankruptcy Attorney Fees

Depending on the complexity of your case, the average attorney fee for filing bankruptcy chapter 7 is between $500 and $3000, with the US average sitting at $1500. It seems like a scary number at first, but it can ensure you get debt relief as quickly and compliantly as possible.

Flat Fee or Hourly Fee?

Attorney fees can be charged as either a flat fee or an hourly rate. In the vast majority of chapter 7 cases, an outright flat fee is discussed and agreed upon before proceedings start. This is beneficial in several ways:

• You know exactly what to expect from the bill at the end of the proceedings.
• Nasty surprises during a time as turbulent as filing for bankruptcy are not welcome.
• Hourly bankruptcy attorney fees are likely to rack up quickly and could cost you more.
• Most lawyers allow you to set up a plan for payment, just like the filing fees, to pay off the balance.
• Proceedings tend to follow the same path, all of which is covered by the flat attorney fee.

Attorney fees are very rarely charged hourly. If a case is exceptionally straightforward and likely to be over in a short time, an attorney may offer hourly fees as an alternative. It could work to your advantage, provided nothing goes wrong unexpectedly.

How to Pay the Attorney Fee

Bankruptcy attorney fees are usually allowed to be paid in installments. However, although payments do not necessarily have to be paid upfront, the full balance should be met before the attorney submits the case.

The reason attorneys insist on all fees being paid before filing the petition is that they may not be permitted legally to bill you once the case goes through. Because chapter 7 relieves you of most debt obligations, the people you owe money to are not allowed to press you for payment.

Even the person you are paying to make that possible cannot ask you to pay them if they do the job successfully. Confusing, yes, which is why a bankruptcy attorney is unlikely to proceed with your application until all fees are paid.

The method of payment is specified by the attorney or their firm. It is often a money order, bank transfer, or cheque, but payments must clear before any work begins.

Choosing a Bankruptcy Lawyer

Before you file bankruptcy, it is essential to confer with an experienced and suitable lawyer. Not every law firm has expertise in filing bankruptcy, so take the time to research before you start racking up fees. An excellent way to find bankruptcy attorneys in your area is through a lawyer referral service.

Please remember, the use of this website may be considered only for advisory purposes. This advice does not constitute legal aid or official information from a professional law firm, which this site is not.

Legal advice provided on this site should not be considered a lawyer referral. Some information on this website may be paid attorney advertising.

In some states, the court may constitute a lawyer referral or recommend certain cases to pro bono firms.

Conclusion

When it comes to any legal proceedings, it is always beneficial to speak to a lawyer. Need professional help? It is okay to seek advice. A bankruptcy attorney is a great person to have on your side during a time that nobody ever wants to face.

Chapter 7 is very final and is not something you can brush off easily. There is a good chance the person filing ends up back at square one with a black mark on their credit rating.

Having an attorney is the best way to get through the process as intact as possible. The fees involved may be off-putting, but the long-term benefit of using a professional could be tenfold.

Bankruptcy chapter 7 is a serious legal proceeding. It should be used only as a last resort when there are no other paths to take. Attorney fees are a necessary evil to make this difficult time go by quickly and compliantly.