Bankruptcy Fees & Expenses

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Filing for bankruptcy protection is neither cheap nor easy. As a result of intense lobbying by the largest consumer finance companies, the Bankruptcy Code was amended in 2005 to make it more difficult for consumers to discharge their debts under Chapter 7. New eligibility requirements were established by The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. For example, an approved Credit Counseling Course must be completed before a bankruptcy petition may be filed. The United States Trustee has a list of approved credit counseling providers. The list is searchable by state. Many of the providers allow participation by phone or internet. The cost is about $50. In addition to proof of completion of the course, the bankruptcy petition must include proof of income for the sixty (60) day period prior to filing as well as a copy of the debtor’s last tax return with proof of filing.

Filing Fees

The bankruptcy court filing fee must also be paid at the time of filing of the bankruptcy petition (currently $299 for Chapter 7 and $274 for Chapter 13). In addition, if you are filing for Chapter 7 bankruptcy protection and using a bankruptcy lawyer, your lawyer will typically expect to have his or her legal fees and expenses paid in full prior to the filing. Depending on the complexity of the particular case, the legal fees may range from several hundred dollars to a few thousand. In a straightforward “no-asset” case without meaningful exempt property, no complex real estate issues and with no tax or child support problems, I would not be surprised by fee of $1,000 to $1,500. If your case is complicated (for example, you own a small business, have estate planning or tax issues, or have a significant amount of property that you intend to claim as exempt property), if your financial records are incomplete or in disarray or if you are filing jointly with your spouse, you should expect the legal fees to be higher.

Installment Payments

Most bankruptcy lawyers will allow you to pay their fees by installment while they are preparing your petition and schedules. In a Chapter 7 bankruptcy case, your bankruptcy lawyers will usually not file your petition until they have been paid in full. If you are paying your bankruptcy lawyers on installment, you can use this time to collect the financial information they will need to prepare the various bankruptcy forms and disclosure schedules to your petition.

With the bankruptcy court's permission, however, individual debtors may pay in installments. The number of installments is limited to four (4) and the debtor must make the final installment no later than 120 days after filing the petition. The bankruptcy court may extend the time of any installment, provided that the last installment is paid not later than 180 days after filing the petition. If you are filing jointly with your spouse, only one filing fee is required. Failure to pay these fees may result in dismissal of the bankruptcy case. If your income is less than 150% of the poverty level and you can establish that your disposable income is insufficient to pay the Chapter 7 filing fees, even in installments, the bankruptcy court may waive the fees. Submit Bankruptcy Form B3B with your Chapter 7 bankruptcy petition in order to request a waiver of the filing fee.