How Much Does It Cost to File Bankruptcy in 2020

Have you come to a point where saving your credit is less important than getting out of debt?

Have you realized that staying the course and making minimum payments for the next 30 years is not a workable debt elimination strategy?

Then what’s next?

Is it time to consider filing for bankruptcy?

Even though you do not have enough money to pay creditors, the bankruptcy court expects you to pay court fees, the bankruptcy trustee, and an attorney. In addition to these fees, you also must pay for and complete two court approved financial education course.  Here is how it adds up and what you can expect to pay if you choose to file for bankruptcy protection.

The Cost of Filing Chapter 7

Filing bankruptcy in federal court comes with fixed fees totaling $335. Costs include a $245 filing fee, $75 administrative fee, and a $15 trustee surcharge. Reopening a Chapter 7 bankruptcy filing will cost an additional $260.

The Cost of Filing Chapter 13

Federal courts charge $385 for Chapter 13, which includes a $310 filing fee and a $75 administrative fee. Reopening a Chapter 13 filing will cost an additional $235.

Required Education Courses

In addition to filing fees, courts require you to complete two educational courses. One at the beginning of the process and the second before the discharge occurs. These courses typically cost around $50 each. Nonprofit credit counseling agencies offer approved courses, both online and in person.

Attorney Fees

Attorney fees vary widely depending on the state in which you live, the type of filing, and the complexity of your case. Most attorneys charge an hourly rate, and the more complex your situation is, the more it will cost.

According to the American Bankruptcy Institute, the national average for Chapter 7 bankruptcy is $1,072, and for Chapter 13, $2,564.

Circumstances That Impact Bankruptcy Costs

Your circumstances also impact the cost of bankruptcy. For example, having multiple sources of income, filing for both you and your spouse, or a personal and business bankruptcy will increase costs. Other factors that could raise attorney costs include households with higher income levels, having more than the average number of creditors, and the need to stop a foreclosure or repossession. You will also pay more if you have previously filed, have non-dischargeable debts, or face accusations of fraud.

Why You Should Always Use a Bankruptcy Attorney

The law does not require you to use an attorney. However, the process of filing for bankruptcy has many hurdles and necessitates a deep knowledge of bankruptcy law. Mistakes can cost more than what you would pay for representation. A few of the most common mistakes made by consumers who take the DIY route include:

1. It’s not necessary to file. There are many ways to obtain debt relief, and bankruptcy is not the right course for many consumers. For example, you might be judgment proof, or there might be another route that will provide faster relief at a lower cost with less lasting negative impact to your credit score.
2. You don’t file the right kind of bankruptcy. Chapter 7 and Chapter 13 solve different problems. Filing the wrong one could lead to changing your position, which means incurring more fees.
3. You miss a deadline or fail to file all the required documents. Missing a deadline, disclosure, or other paperwork could lead to a dismissal and prevent you from refiling for a period of time, exposing you to litigation from collectors.
4. Fail to protect assets. Laws allow you to keep assets under certain circumstances, but only if you file paperwork correctly.

Bankruptcy attorneys know the legal process and will ensure you file the right chapter, protect your assets, and submit the proper paperwork within the guidelines.

Alternatives if You Cannot Afford to File bankruptcy

Millions of consumers face the inability to repay creditors and find solutions outside of bankruptcy. In many cases, you can settle unsecured debts for less than the full balance, without the need for court-supervised repayment plans established in Chapter 13 or liquidating property or other assets under Chapter 7 bankruptcy. If you are struggling to pay your debts, but want to avoid the high cost of filing for bankruptcy and the long term negative impact that comes with bankruptcy, consider speaking with a debt settlement agency or law firm that specializes in debt negotiation.  In many cases, consumers can be out of debt in 24-48 months without the negative, lasting impact to credit that comes with filing bankruptcy.