How Much Does Bankruptcy Cost?

April 12, 2013

This seems to be the first question that many folks ask me when they call me about bankruptcy. Unfortunately, this is not a one size fits all type answer, so the best answer I can give is that “IT DEPENDS”. Once I hear the details of the case, I can then easily quote an exact price that includes all costs and try to anticipate any issues that may arise later.

Bankruptcy Costs

Chapter 7

Chapter 7 for my firm as of this writing has a legal fee between $1000-$2000 plus costs of about $400. So it would be appropriate to budget around $1500 or so.

Chapter 13

Chapter 13 lawyer fees are usually between customarily set by the courts as the standard fee of around $3000-$3500, although we typically let clients pay half of the fee through their re-payment Plan.

Also note that over the years and especially after the revised bankruptcy rules went into effect in 2005, the fees and costs have risen. When I started doing bankruptcy in the 1990s, the fee was $500 or less and the filing fee was less than $200. Plus no credit counseling courses and no Means Testing of Income. Things were easier and cheaper, but it is not so bad now even with the revised laws and we do try to work with folks to make it as affordable as possible

My firm charges the same fee for Philadelphia Bankruptcy as we do for New Jersey Bankruptcy. Bankruptcy is a federal law, so the filing fees and costs are pretty standard, although there is some slight local variations to procedures. For example, out bankruptcy trustees in New Jersey file a separate “Notice of Sale, Auction, or Abandonment” on every case in which the debtor own real property.

Your attorney will need to provide the trustee with evidence of the house value and any mortgage balances, so the trustee can sort of “sign off” and say she/he does not “care” about your house. Technically, the trustee is “abandoning” the real estate as an asset of the bankruptcy estate since there is not any non-exempt equity. I explain this to all of my clients so they understand what to expect. Bankruptcy is largely about being organized and prepared.

We have bankruptcy payment plans to ease the burden and often help folks budget for the payment. Many clients chose to use the money they were previously paying their creditors to pay the lawyers fee each month instead.

Exact Bankruptcy Fees Will Depend on Factors Such As:

The Type of Bankruptcy Being Filed
A Chapter 13 is more expensive than a Chapter 7, although some lawyer fees can be put on the monthly repayment plan to help ease this burden.

Details of the Case
More complicated cases are usually more expensive than easier cases. An easy case may consist of one with lower debt, less assets, lower income. It takes more work to prepare a case involving multiple properties, business income, trickier assets. When I set my fee on each each it can vary a bit depending on the circumstances.

On You, The Client
A client who is more organized with all of their documents from the start will certainly be easier to deal with. Helpful tip- Consider have copies of your last 2 years tax returns, 6 months of your paystubs or other income, bank statements for 3-6 months, deed-mortgage balance-house valuation report if you own property, a list of your debts. You will also need to complete a pre-bankruptcy credit counseling course (usually done online) before filing.

Some lawyers may negotiate their fee if you have all of the payment in hand or a big chunk of it at the start. Otherwise, the lawyer will be dealing with multiple payment from you over time and during the time your circumstances could change. Another timing issue is whether you need an emergency fast filing done and how much time the lawyer can dedicate to your case.

The Bankruptcy Lawyer
There can be a bit of a range between what different lawyers charge, but they are generally pretty close. Usually the lowest fees might be from higher volume firms that are sometimes known as “bankruptcy mills”. Obviously, your case will not get as much attention with this sort of company, some of which have a national presence and typically have a young local lawyer doing the intake but a clerk in a different state preparing the papers. I would suggest avoiding that sort of company. Research the company and lawyer to see what his/her clients say in reviews and try to find referrals from others who might have used the lawyer. The lawyer with the highest fee may not necessarily be the best either, so put the time in to really research this. Experience also counts, so please take that into consideration.

What is Included in the Price
Many lawyers charge extra fees for extra items such as vehicle reaffirmation agreements (we include these in our price), motions, and various court appearances. I have had many clients come to me after they felt like they were mislead or overcharged from prior attorneys.

In Summary
Bankruptcy fees vary depending on the details. Be careful which lawyer you pick for your bankruptcy as it can have bad consequences if things are not handled properly. Carefully research the lawyer and make sure you are comfortable with your decision. Be very prepared with prior research, documents, and a plan to pay the lawyer, and the lawyer will be able to help you more easily. Mostly, understand that the bankruptcy process will be a “cooperative” effort between you and your lawyer. You will need to work together to get everything done right. Do me a favor please:

When you call a bankruptcy attorney, don’t ask “HOW MUCH?”, as your first question.

Do try to speak with the attorney by telephone or in person, give the attorney a complete feel for your situation, and then try to get a straight forward feel for the fee. The fee is important, but so is the value and quality of the representation you get.

Bankruptcy can be a very powerful solution for those with financial problems, but it has to be done right and will require a bit of work from everyone involved.


By David Reinherz

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