How Much Does It Cost to File Bankruptcy?

Everyone preparing to file for bankruptcy wants to know the cost. After all, bankruptcy usually comes at a time when money is tight.

Below, we’ll talk about filing fees, attorney fees, the cost of filing on your own versus filing with an attorney, and what your expected total bankruptcy cost might be.

Filing Fees and Required Courses

First off, bankruptcy filers must pay a filing fee. For a Chapter 7 case, the fee is $335. For a Chapter 13 case, the fee is $310. The Bankruptcy Trustee may charge a fee of $15 to $20 when you file, as well. You may request to pay the filing fees in installments; most courts will allow it if you can show it would be a financial hardship to pay all at once.

If you file under Chapter 7 and later convert to Chapter 13 (generally because you don’t qualify for Chapter 7), you won’t have to pay any extra fee. However, if you file under Chapter 13 and later convert to Chapter 7 (generally because you don’t keep up with your plan payments) you’ll have to pay a conversion fee of $25.

Aside from the filing fees, you’ll be required to obtain credit counseling and take a personal financial management course. That generally costs anywhere from $20 to $100, depending on where you file.

Bankruptcy Costs

What are the normal fees for a bankruptcy attorney?

You can file “pro se,” (without the help of an attorney) but the success rate is not good. In the Los Angeles area, for example, nearly twice the number of pro se Chapter 7 cases were dismissed as attorney-represented cases in 2014 — and attorneys filed nearly four times as many cases as self-represented parties. With an attorney, the success rate of a chapter 7 bankruptcy case is over 95%.

For Chapter 13, pro se filers do even worse than their Chapter 7 counterparts. The attorney-represented success rate for Chapter 13 in the Los Angeles area is over 55%, while the pro se success rate is only 0.04%, or 1 in 2,500. Less than half of all chapters filed pro se in 2014 received a discharge, while over 82 percent of attorney-represented cases were discharged.

Most people file pro se because either they think they don’t need an attorney or they think can’t afford an attorney. You probably know that attorney fees make up the majority of the cost of filing for bankruptcy. You’re already short on cash and you don’t have much to spare for a lawyer. You’re looking for the best rate you can find. So, what can you expect to pay?

Average Chapter 7 Bankruptcy Attorney Fees

Under Chapter 7, you’ll surrender all of your non-exempt property to the Bankruptcy Trustee. Bankruptcy exemptions vary by district and some give more protection than others. The Trustee will sell that property and use the proceeds to pay your creditors. At the end of the process, your remaining unsecured debt is “discharged,” which means it’s forgiven.

When you file under Chapter 7, you’ll generally have to pay up-front. Nationwide, the average attorney fee for a Chapter 7 case is $1,250. That cost may vary significantly by market. You can generally expect to pay more in a large metro area than in a small town. In addition to your location, the complexity of your case — and the quality of your attorney, if we’re being honest — may affect your fees. If you’re filing a relatively simple “no asset” case (when you have no non-exempt assets), you’ll pay less than you would for a complex case which is more likely to result in litigation. The cost will also vary based on the experience level and professional reputation of the attorney. An experienced attorney in a well-established firm will charge more than a fresh law school graduate.

An attorney will handle all of the administrative issues in the case — filing the paperwork in the right place and at the right time with the right content. She’ll also help you use the local or federal bankruptcy exemptions to protect as much of your property as possible. If creditors object to your discharge or request relief from the automatic stay (which stops them from trying to collect from you during the bankruptcy process), your attorney will answer their motions and ensure that you’re relieved of as much debt as possible.

Attorney Fees are Public Record

That’s right — your attorney has to disclose her fees and they’re available to the public. You can research any bankruptcy law firm’s fees on the federal PACER website. PACER costs $0.10 per page viewed and you can search either by bankruptcy district to get a general sense of the fees in your area of by specific law firm to get an idea of what a particular attorney will charge. Local rules may require additional disclosure, but at a minimum attorneys must list their fees on the Statement of Financial Affairs, which requires a list of:

… all payments made or property transferred by or on behalf of the debtor to any persons, including attorneys, for consultation concerning debt consolidation, relief under the bankruptcy law, or preparation of a petition in bankruptcy within one year immediately preceding the commencement of this case.

Average Cost of Chapter 7 Bankruptcy in Major Cities

So, let’s take a look at some PACER info on the actual bill for an attorney. We took a look at a random sample of Chapter 7 cases in a few major metro areas to get a sense of the bankruptcy attorney fees in each area. In Los Angeles, the tab ranged from $1,500 to $2,000. In Dallas, it was $774 to $1,820. In Miami, attorneys charged anywhere from $1,000 to $2,000, and in New York City, the bill was in the range of $1,000 to $2,200.

There’s a lot of variation depending on the complexity of the case. In addition, many debtors qualify for free or discounted legal help, leading to even more variation.

One bankruptcy attorney in Los Angeles warns consumers to be on the lookout for competent, board-certified attorneys to handle their case. A bankruptcy is delicate, and you want someone with plenty of experience to represent you. A difference on the front end of a few hundred dollars could actually cost thousands in the long run, including refiling fees.

“People looking to file for bankruptcy should be careful about focusing solely on the cost,” said M. Erik Clark, managing partner of Borowitz & Clark, LLP. “There are so many ways that a bankruptcy case can turn out wrong and having an experienced attorney can help them avoid a bad outcome.”

Average Chapter 13 Bankruptcy Attorney Fees

Under Chapter 13, you’ll work with the Trustee to create a payment plan for your debts. The plan will last for three to five years and at the end of it, your remaining unsecured debt is discharged. Unlike under Chapter 7, local bankruptcy law usually sets the “presumptively reasonable” attorney fees for Chapter 13 cases. If the attorney charges the presumptively reasonable fee, the Court won’t look into the charges unless you specifically request it.

Presumptively reasonable fees vary based on the complexity of your case. Nationally, the average is around $3,000, but each bankruptcy district has its own standards and rules. In San Francisco, for example, the presumptively reasonable attorney fee is $3,500 for the basic case, plus anywhere from $500 to $1,500 extra for various issues that add complexity to the case. In the eastern district of North Carolina, it’s $3,700 plus extra fees for complications. In central Alabama, the presumptively reasonable fee is $2,750, and any extra fees will be examined by the court.

For Chapter 13 cases, attorneys generally charge a certain fee up front. Some attorneys will charge only the filing fee and others will want a larger down payment. You’ll pay the rest of your attorney fee through the Chapter 13 plan. You’ll make your regular plan payments to the Bankruptcy Trustee every month and the Trustee will pay the appropriate portion to your lawyer.

As in Chapter 7, your attorney for your Chapter 13 case will handle all of the administrative work. She’ll also help you navigate the complex rules governing Chapter 13 payment plans to create a plan that you can handle and that will satisfy the court. As in Chapter 7, if your creditors attempt to challenge the automatic stay, your plan, or your discharge, she’ll answer their motions and make sure that they can’t take advantage of you.

What are other possible bankruptcy fees?

We now know that attorneys may charge more for complications. Your average bankruptcy case doesn’t have any — most are fairly straightforward. You’ll file, you’ll either surrender your assets or work out a payment plan, you’ll get your discharge, and you’ll go on your merry way. However, not every case is so simple.

Bankruptcy isn’t just about filing forms. There’s a lot of room for litigation, especially surrounding Chapter 7 exemptions. So, while attorney fees for an easy, open-and-shut Chapter 7 case will fall around $900-$1,500, most firms will charge more if court time becomes necessary.

For example, say the Bankruptcy Trustee objects to your valuation of some property you want to exempt. That question will have to be resolved in front of a judge. Your attorney will have to prepare a defense and appear in court, which will probably cost you a few hundred dollars extra. If someone files an adversary proceeding in your case (perhaps objecting to your discharge on grounds of fraud or concealment of records), you’re looking at a lot of research, preparation for a whole case, and plenty of court time. The bill for an adversary proceeding may well be in excess of $10,000.

Of course, these scenarios are relatively rare. Most cases proceed smoothly if you have a competent lawyer. However, the scenarios above are possible and you should be aware of them as you calculate the probable cost of your bankruptcy.

Free Legal Help

In every state, low-income individuals have access to free legal help. If you’re considering filing for bankruptcy or struggling with debt, the state provides free credit counseling services and bankruptcy clinics. Reach out to your local legal aid society to see if you qualify for free legal aid.

You Get What You Pay for in a Bankruptcy Case

Filing for bankruptcy is complicated. To add to the confusion, bankruptcy reform legislation passed in 2005 made bankruptcy law significantly more complicated. The requirements for filing and document production are confusing and difficult to meet. A good bankruptcy lawyer knows the rules, the system, and the courts. She’ll also be able to communicate effectively with the Bankruptcy Trustee — you don’t want to have to learn legalese on the fly.

You’ve probably seen billboards and cheesy commercials advertising cheap Chapter 7 filings. Is it a good idea to use the cheapest bankruptcy attorney? Probably not. You’re right to be cost-conscious when you’re already strapped for cash, but a cut-rate bankruptcy attorney is going to cost you in the long run. Lawyers that offer reduced-fee filing often hand your case down to a paralegal that handles the whole thing with little or no supervision. The low price comes with inexperience and poor attention to detail. Paralegals play an important role in legal work, but you want to have your case in the hands of an attorney.

If your case is dismissed (which can happen for any number of reasons, including failing to file the right thing at the right time), you won’t get the full protection of bankruptcy when you file again later. Serial filers don’t get the benefit of the automatic stay, so creditors can and will initiate foreclosure, repossession, and lawsuits leading to wage garnishment and bank levies.

An experienced attorney will help you get the most out of your bankruptcy. She knows how to use the bankruptcy system to protect your assets and she knows how to deal with objections from creditors. She can minimize the risk of something going wrong with your case. Just take another look at the statistics we mentioned above – the success rate is over 95% for Chapter 7 cases filed with the help of an attorney and over 55% for Chapter 13 cases. Compare that to the 60% success rate for Chapter 7 cases filed pro se and the 0.04% success rate for pro se Chapter 13 cases. When it comes to bankruptcy, it pays to have a reliable lawyer.

See also: Don’t Fear Your Meeting of Creditors

Your Total Bankruptcy Cost

Adding up all of our costs, you’re looking at $350-$450 if you file pro se. Of course, it’s overwhelmingly likely that your case will be dismissed and you’ll be left on your own to face your creditors. With an attorney, an average Chapter 7 case can cost anywhere from $1,500 to $3,000. An average Chapter 13 case will run you from $3,000 to $4,000.

Consider that the average indebted household carries over $15,000 in credit card debt alone, not to mention medical debt, personal loans, second mortgages on underwater homes, and other types of unsecured debt. In bankruptcy, you’d pay pennies on the dollar toward that debt.

With that in mind, a few thousand dollars seems like a small price to pay.