If you’re facing bankruptcy, you’re likely feeling the financial stress like a ton of bricks. Bills have piled up so high you can’t see, your wages may be getting garnished, and you feel more than stuck. In these situations, paying for a bankruptcy lawyer may seem like something you can’t afford. However, there are affordable options that offer better protection than “discount bankruptcy” companies do. In this article, we’ll break down the real costs of filing for bankruptcy, how to protect yourself throughout the process, and what you need to know about this important financial decision.
Understanding Chapter 7 vs. Chapter 13 Bankruptcies
Upon researching bankruptcy, two terms you’ve probably seen come up a lot are Chapter 7 and Chapter 13 Bankruptcy. We’ll explain both terms in this article, but we recommend scheduling a free consultation with Reinert & Reinert to understand which route may be right for your situation.
Chapter 7 Bankruptcy
Chapter 7 is frequently referred to as the “fresh start” route. It takes less time to complete than Chapter 13, and it can entirely get rid of debts like credit card bills, payday loans, medical expenses, and other unsecured debts. Not only will it rid you of this debt in just a few months, but it also ignites an automatic stay, which is a court order that blocks creditors and other debt collectors from all of the calls and collection attempts. As you can likely imagine, this provides many people a huge relief.
Chapter 13 Bankruptcy
On the contrary, Chapter 13 typically takes more time to complete, and you will still have to pay your obligations through a court-structured repayment plan. This alternative is typically used for more complex financial situations. Chapter 13 allows you to catch up over time while stopping the stress-inducing collection attempts (Chapter 13 employs an automatic stay prohibiting collection attempts, too). This bankruptcy route will come with a three to five-year repayment plan. Depending on your specific situation, you may be able to have your debt discharged or decreased. A large benefit of Chapter 13 is that it allows you to keep certain assets that Chapter 7 may not.
It’s essential to understand that some debts will not be eliminated under either bankruptcy option. These debts may include:
- Tax and other government obligations
- Child support
- Auto loans
- Student loans
The Hidden Costs of Filing for Bankruptcy
Unfortunately, filing for bankruptcy does cost money. The amount you pay is often correlated with the protection and competency you receive amid the process and thereafter. This is why you should be wary of those advertising “$500 Bankruptcy Filing” offers and the likes. If it sounds too good to be true, it very likely is. A lawyer will analyze your specific situation and direct you on the best steps to take to ensure you are protected and have the means to recover after the bankruptcy has been filed. Making even one small mistake can cost you a lot more money than paying lawyer fees to ensure you get the proper outcome. Keep these things in mind as you proceed with your bankruptcy lawyer cost research:
- Hiring a lawyer means you have a coach on your side to ensure you make the right decisions, collect and submit the proper documentation, answer your questions along the way, and keep other important factors in check.
- In those low-cost bankruptcy options, often filing fees aren’t included. This means that the “$500 bankruptcy” offer isn’t the full picture. Chapter 7 petition filings cost $335 and Chapter 13 petition filing fees cost $310.
- In those “extremely low-cost bankruptcy filing” offers, you won’t have anyone by your side during mandatory meetings, such as the 341 meeting. Imagine showing up alone in front of all of your creditors with just a folder of documentation. Having a bankruptcy attorney with you will ensure you’re more prepared, which will lead to a much better outcome.
- Don’t forget about other costs you may be required to pay, including mandatory debt counseling. Not completing this course will derail your efforts, causing your bankruptcy to be dismissed, which means you’ll still owe all of your debts.
- You won’t miss any important steps with a lawyer. The process can be complicated, and there are quite a few steps that are crucial for your bankruptcy judgment that you do not want to miss.
If you think you can’t afford a bankruptcy attorney, remember that bankruptcy is meant to reset your financial situation. Your debts will be taken care of so that you can start fresh. If this isn’t done correctly, it could do the opposite for you and leave you potentially worse off in the long run.
How Much Can I Expect to Pay to File for Bankruptcy?
Your bankruptcy fees will, in large, depend on the size of your debt, whether you decide to file Chapter 7 or 13, the specific lawyer you choose, and other facts. The Chapter 7 bankruptcy filing cost range will be anywhere from $1,000 to $3,500, depending on the factors previously listed. Chapter 13 filings will cost anywhere from $1,800 to $6,000. Note that these are the average costs to file for bankruptcy, and you should speak with an attorney to understand his or her specific cost structure, fees, and recommendations.
Commonly, you will have to pay Chapter 7 fees upfront. At Reinert & Reinert, we offer convenient payment plans to help you navigate this cost. We also offer a $0-down payment with Chapter 13 filings.
Frequently Asked Questions about Bankruptcy Costs
In this section, we’ll cover some quick FAQs to help you navigate this stressful financial situation. If you have other questions, be sure to check out our online bankruptcy resources.
Is It Better to File a Chapter 7 or 13 Bankruptcy?
People often want a quick answer to this question, however, it really depends on your situation. Chapter 7 can erase a lot of debt for you in less time, but you may have to sacrifice some assets or property. Additionally, not everyone is eligible to file for Chapter 7. Chapter 13 allows you to retain certain assets and get on a court-structured repayment plan. However, some people don’t make enough money to justify Chapter 13. Note that both options come with an automatic stay.
Will Filing for Bankruptcy Stop the Collection Calls?
Yes, both Chapter 7 and 13 grant automatic stays, which is a court order prohibiting collectors from contacting you about your debts.
How Long Does Bankruptcy Take?
It takes an average of three to five months to go through the bankruptcy process. This may be shorter or longer depending on your circumstances, but here’s a general timeline:
- Initial consultation with your bankruptcy attorney
- File your case - You can choose when to file your bankruptcy case.
- Hearing - This typically happens in about 30 to 45 days following the filing of your petition.
- Discharge - In about two to three months following the hearing, creditors will release you from personal liability of certain, specified debts.
Consult an Experienced Michigan Bankruptcy Attorney
At Reinert & Reinert, we offer free consultations, which you can schedule in person, by phone, or via Zoom. We also offer affordable payment plans for clients, including a $0-down plan for Chapter 13 bankruptcy filings. To schedule your no-cost, no-obligation consultation with our bankruptcy attorney in Michigan, call us at 989-799-8860 or fill out our online contact form. We’re looking forward to helping you understand your financial options and get your life back on track.