What Is The Cost Of a Chapter 13 Bankruptcy?

If you are faced with the prospect of bankruptcy, you may be surprised to know that even bankruptcy itself has a cost associated with it.  It seems counter-intuitive that a person who cannot afford to pay their bills should be forced to pay a fee to receive legal relief from the payment of these bills, but that is how the system works.  Since the major bankruptcy law changes in 2005, which removed the ability of individuals to file for bankruptcy on their own without consulting or retaining an attorney, the average cost of bankruptcy has increased significantly, because all bankruptcy filings must now be handled through an attorney.

Cost of Chapter 13 Bankruptcy

The actual cost of a Chapter 13 bankruptcy itself is only a $274 filing fee, comprised of a $239 filing fee and a $39 administrative fee, all of which is payable to the US bankruptcy court in your jurisdiction.  These fees, along with the retainer which you pay to your lawyer, and any other fees which may arise such as appraisals of property, etc., are typically paid up front to an attorney, who will then take your case, file the necessary documents in bankruptcy court, and begin the process.  Since you cannot file for bankruptcy yourself, you can expect to pay a minimum of around $2000-$3000 for your initial bankruptcy filing, depending on the complexity of your bankruptcy and the retainer charged by your attorney at the time of hiring.

On average, the cost of a Chapter 13 bankruptcy filing has increased since the law changes in 2005.  During the period of 2005 to 2007, the median cost of consulting and retaining an attorney through a Chapter 13 bankruptcy process increased from $1,000 to $3,000, based on studies done on attorney costs during bankruptcy nationwide.  In addition, the 2005 law increased the filing fee from $194 to $274, which, while only an $80 increase, is significant for an individual who is facing the prospect of bankruptcy because of lack of income necessary to pay their bills!

In general , if you are facing Chapter 13 bankruptcy, know that your costs will be in the $2,000 to $3,000 range, plus any ancillary costs such as taxes which may have to be paid to the IRS on the discharged amount of any debts, or additional attorney fees which may be required if  your bankruptcy is unusually complex or if it drags on for an extended period of time and your attorney exhausts the initial retainer which was paid to him.

Getting Legal Help

Although you may be concerned about the cost of bankruptcy, your attorney can act as your advocate and guide, helping you through negotiating all of the legal rules associated with bankruptcy. Your attorney can interface with trustees and creditors and help you to achieve the best and fairest settlement and bankruptcy repayment plan possible.