How Much Does Bankruptcy Cost?
Filing for personal bankruptcy is a major step for anyone struggling with debt, but it can be the right decision depending on your circumstances. While filing for bankruptcy can feel like the last resort for someone with little to no available cash, it's not exactly free.
So exactly how much does it cost to complete a personal bankruptcy? Here's what you need to know.
The type of bankruptcy you file impacts the total cost
There are multiple types (or chapters) of bankruptcy, but the two most commonly used for individuals is chapter 7 and chapter 13.
- Chapter 7 bankruptcy is a liquidation of applicable unsecured debts, and typically requires the sale of non-exempt assets.
- Chapter 13 bankruptcy is known as a "wage earner's plan" and involves reorganizing your debts into a 3-5 year repayment plan.
Chapter 13 is the more common of the two, as Chapter 7 requires you to pass a means test, on top of other requirements.
There are standard upfront fees for bankruptcy
Right off the bat, you'll need to pay standard filing fee to get the process started:
- Chapter 7 is $338
- Chapter 13 is $313
It is possible to get a waiver for a Chapter 7 filing fee based on your income.
You'll also need to complete two courses as part of the bankruptcy filing process: a pre-filing counseling course and a pre-discharge education course. The two courses are separate, but can often be done online or over the phone. The fees for the courses will vary depending on the provider, but you should expect to pay $20-$50 for each course.
Attorney fees can vary dramatically depending on the nature of your case
While you can pursue a bankruptcy on your own, it's almost always in your best interests to work with a qualified attorney. They'll help guide you through the process and make sure you're getting the best arrangement for your circumstances.
Fees for your attorney will vary depending on the complexity of your case, where you live, and the experience level of your attorney.
Chapter 7 attorney fees typically range from $1,500 to $2,500. In a case where you have little to no assets, the fee is often on the lower end of the scale, compared to more complex cases involving lots of assets and multiple non-dischargeable debts, which will usually cost more. Attorney fees for a Chapter 7 bankruptcy typically need to be paid upfront before the lawyer will file the case.
Chapter 13 attorney fees typically range from $2,500 to $3,500, but can be higher if the case is more complex than usual. Unlike Chapter 7 attorney fees, the fees for a Chapter 13 bankruptcy can often be included in your Chapter 13 repayment plan, meaning that the fees are repaid in installments across the life of the plan.
There may be miscellaneous costs along the way
Beyond your standard filing fee, you should expect a small handful of court-related costs along the way, including:
- Administrative fees for copying and mailing documents
- Conversion fees for switching from a Chapter 13 to a Chapter 7 and dismissal fees for having your case dismissed
- Amendment fees for filing amendments to your original petition
All of these fees are usually fairly small (less than $100 total), but they're worth keeping an eye on.
So what does bankruptcy cost?
Every bankruptcy is unique and how much it'll cost you depends on the complexity of your case, the fees charged by your specific attorney, and crucially which type of bankruptcy you file.
Costs for Chapter 7 bankruptcy
- Filing fee: $338
- Attorney fees: $1,500-$2,500
- Courses: $40-$100
- Admin fees: $0-$100
Total estimated cost: $1,878-$3,038 plus the loss of any non-exempt property that was liquidated to repay your creditors.
Costs for Chapter 13 bankruptcy
- Filing fee: $313
- Attorney fees: $2,500-$3,500
- Courses: $40-$100
- Admin fees: $0-$100
Total estimated cost: $2,853-$4,013 plus the amount repaid through your Chapter 13 wage earner's plan.
How much will I have to repay through a Chapter 13 repayment plan?
Figuring out the actual cost of your wage earner's plan is very complicated and hinges on the kinds of debts you have and the amount of disposable income you have at hand. If you have basically no disposable income, you could be asked to repay as little as 10-20% of the total debt. But if you have enough disposable income, you may be required to repay 100% of the debt.
It's complicated, though, which is another reason why working with an attorney is a good idea.
Alternatives to bankruptcy and how they compare
There are a lot of scenarios where bankruptcy makes sense. If you're not sure that bankruptcy is the right fit, or you're worried that bankruptcy is going to be more expensive than you thought, consider some of the debt repayment alternatives offered by MMI:
- With a debt management plan, you'll repay your debts in full, but with reduced interest rates that can have you out of debt in as little as 24 months. The reduced interest rates mean big savings (an average savings of $48,199 to be precise) and repaying the debts in full while avoiding bankruptcy means your credit score will actually improve in the process.
- With a debt resolution plan, you'll repay only a portion of your original balance, usually only half of what you owe, getting you a lower, more affordable payment. And as a nonprofit alternative to for-profit settlement, the debt resolution plan comes with lower fees and less risk.
If you're not sure what's the best option for you, MMI offers free financial counseling 24/7, online and over the phone. Let us review your situation and help you choose the best solution for your goals and needs.
