Considering bankruptcy? It could cost more than you think

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A bankruptcy filing can win you more time to pay off debts, or even let you get rid of your debts altogether. In a conspicuous Catch-22, however, it’ll cost you.

How much does it cost to file for bankruptcy? You can expect to pay about $240 for a basic filing, but considerably more if you plan to hire an attorney—typically a good idea.

There are two types of bankruptcy for individuals, and they can entail different costs:

  • Chapter 13 is for people with regular income; it can let them keep assets such as a house and extend the time they have to repay creditors, usually to a period of three to five years. The basic filing fee is $235.
  • Chapter 7 can wipe away debts, but it’s generally for people with an income below the median for their state, or who meet a somewhat complicated “means test.” The basic filing fee is $245.

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The many costs of bankruptcy

The filing fee is just the start, although the good news is that the fee can be waived for people who can’t afford it, according to the National Association of Consumer Bankruptcy Attorneys (NACBA). However, if you can’t get your  fees waived, you also could face additional expenses and court fees—there are nearly three dozen for various motions and services.

Filing requires receiving credit counseling in advance and taking a credit education course after your case concludes. Those services, however, can be had for free from non-profit organizations, or for a nominal charge.

Other expenses may not be as marginal. In a Chapter 13 case, for example, the trustee appointed to manage repayments is usually entitled to a commission of up to 10 percent.

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Attorney fees raise the price of bankruptcy

If you’re considering bankruptcy, the main reason it could cost more than you think is attorney fees. They can vary widely. Location is one factor, but attorneys also provide different degrees of help and have different levels of expertise. And some cases are much more complex than others.

Attorney fees tend to range from $700 to $800 at the low end to $2,000 or more, according to David Siegel, a Chicago-based bankruptcy attorney and the author of Chapter 7 Success: The Complete Guide to Surviving Personal Bankruptcy.

Consider going pro bono

It’s possible to file without an attorney, but experts warn that it can lead to mistakes that prompt the court to dismiss the case. Bankruptcy judges and other court employees are prohibited from offering legal advice, as are services that prepare bankruptcy petitions for a fee.

One option for reining in how much it costs to file for bankruptcy is seeking a pro bono attorney who’ll forgo fees as a public service. There are a number of places to look for one, including state bar associations and local and regional free legal clinics.

Don’t forget a bankruptcy also can carry less tangible costs. It would stay on your credit report for 10 years, and could make it difficult to get approved for a loan or even land a job during that period. You need to weigh all the costs against the potential gain when deciding whether to file a case. If your debts aren’t large or troublesome, says the National Association of Consumer Bankruptcy Attorneys, it may not be worthwhile.