Why does it costs so much to file bankruptcy and can I make payments?

Although many debtors continue to face spiraling, out of control debts it’s not unusual for many debtors to feel that filing for bankruptcy protection is too expensive. Recently on our legal forum a user asked, “I have investigated every potential solution to my financial issues and have decided filing bankruptcy is the best choice for me. Unfortunately, I don’t have enough money to file. What are my options and can I make payments to the bankruptcy court and to my attorney?”

Costs of bankruptcy are high

Unfortunately, this bankruptcy filer is right. In fact, as of January 1, 2015, the total fees collected by the bankruptcy courts at the time of filing are as follows:

• Chapter 7 $335
• Chapter 9 $1,717
• Chapter 11 $1,717
• Chapter 12 $275
• Chapter 13 $310
• Chapter 15 $1,919

These fees do not include the additional costs for taking the classes required by the bankruptcy court or the costs for hiring a bankruptcy lawyer.

Steps to reduce bankruptcy costs

So what are the options for debtors who do not think they have enough money to file for bankruptcy? The good news is there are a few options. Each option is discussed below.

1. Apply for a Chapter 7 bankruptcy filing fee waiver.

First, to reduce the burden of paying for the filing fees, bankruptcy filers can request to make the bankruptcy filing fees over an extended period of time, generally within 120 days. If, however, the bankruptcy filer is not able to make the installment payments over a 120 day period, and if their combined family income is less than 150% of the official poverty line (i.e. an individual’s income is less than $1,458.75 per month), they can request a waiver for the bankruptcy filing fees.

To make the waiver request you must submit an Application for Fee Waiver with the appropriate bankruptcy court. The court does not have to accept the fee waiver request.

2. Request a reduction in the costs for the bankruptcy classes.

Bankruptcy filers are required under current bankruptcy laws to take both a court approved credit counseling course before filing Chapter 7 or Chapter 13 bankruptcy and a financial management course prior to the bankruptcy discharge. Filers who do not take the appropriate courses may have their bankruptcies denied.

Although these courses can cost anywhere from $15 to $70, counseling centers are also required to provide their services for free to qualifying debtors. If you do not have the money to pay for the credit counseling courses talk to the credit counseling agency and determine what your options for installment payments or free courses might be.

3. Determine if you need to hire a bankruptcy lawyer.

It’s no secret that the greatest expense for filing bankruptcy is hiring a bankruptcy lawyer. Fees may be even more expensive in large cities or if you hire a lawyer with a good reputation.

Although a bankruptcy lawyer may be willing to offer a free consultation to review your claim, very few bankruptcy lawyers are willing to work pro bono or without payment. And why should they? How many of us want to go to work each day and not receive compensation for our work.

If you do decide to hire a bankruptcy you can expect to pay the following:

Costs to hire a Chapter 7 bankruptcy lawyer: $750 or more Costs to hire a Chapter 13 bankruptcy lawyer: $2,500 to $4,000

Can I pay my lawyer in installments?

We have discussed how you can have your fees for filing and educational courses eliminated or spread out over an extended payment period. Lawyers may also allow you to make installment payments.

In fact, if you are filing Chapter 13, the bankruptcy lawyer’s fees are often spread over the term of the Chapter 13 bankruptcy repayment plan.

Chapter 7 lawyers may also allow you to make several installments, but all installments must be made prior to their filing your bankruptcy petition. Note, bankruptcy lawyers will not file the Chapter 7 bankruptcy petition until the last payment is made.

Best way to reduce the cost of bankruptcy

As mentioned above, filing bankruptcy can be very expensive. The most efficient way to lower the costs is to file is not to hire a bankruptcy lawyer. Unfortunately, this is not always a good idea. Although many debtors with simple bankruptcies may benefit from doing the work on their own or hiring a non-attorney representative to prepare bankruptcy petitions, if your bankruptcy is complicated or if you are attempting to protect your assets, you may need legal help.

Consider also, although the court clerks and non-attorney representatives may be able to provide general information about how to complete bankruptcy forms, they are not attorneys and cannot provide legal advice. If you need legal advice you need to hire bankruptcy lawyer.