- Personal Finance
How to Pay for a Bankruptcy Filing
The decision to file for bankruptcy often puts individuals in what seems like a relatively ironic situation. You may find that you can’t pay your debts but when you contact a lawyer he wants a large upfront fee to handle your case. If you can’t pay your bills to begin with, where are you going to get upwards of $1,800 or more to have a lawyer file your bankruptcy petition with you?
Understanding Your Bankruptcy Fees
The first thing you need to understand about filing for bankruptcy is the fees that are charged. If you choose to work with a lawyer you will find you are paying two different fees. The first is the fee that the court charges for filing and the second is the lawyer’s retainer fee.
The court filing fees are relatively low considering the complexity of a bankruptcy petition and are standard across the entire country. Filing for a chapter 7 bankruptcy will cost you $299 and filing for chapter 13 will cost $274. If you file without the aid of a lawyer you may be able to ask the court to put you on a payment plan, but your case will not be closed until your entire fee has been paid.
The lawyer’s retainer fee will vary depending on the state in which you live and the lawyer you have chosen. Expect to pay anywhere from $1,000 - $3,000, sometimes even more, depending on the complexity of your case. This fee is on top of the standard court filing fee, which you will also pay directly to the lawyer.
If I can't afford to pay my bills how can I afford to ...
Can I Really Afford to File?
By this point you probably feel as though you’re in a catch-22 situation as far as your finances are concerned. There are, however, a few options that will make it easier to pay your bankruptcy lawyer.
- Stop making payments to your creditors and use that money to pay the lawyer (most lawyers will advise you to stop making payments, anyway).
- Ask your lawyer if he will put you on a payment plan.
- Save your tax refund checks, especially if you expect you will be filing for bankruptcy. You can use them to knock a considerable chunk off of your debt to your lawyer.
How NOT to Pay for Your Bankruptcy Filing
There are quite a few creative ways to find the money to pay for bankruptcy, even if you have to take a second job for a while or borrow money from family. In the meantime, make sure you do NOT do any of the following.
- Do not use a credit card to pay for your bankruptcy filing.
- Avoid taking money from your retirement account to pay for bankruptcy unless there is a specific emergency that requires you to do so (ie. a pending home foreclosure).
The idea of paying such a large fee to a bankruptcy attorney may seem daunting but it’s important to look at the overall picture. In many cases individuals pay only $1-2,000 dollars to discharge tens of thousands of dollars worth of debt. In the end, you’re getting much more than you ever bargained for.