Ouch! Bankruptcy is Expensive

Thinking about filing for bankruptcy? There are significant upfront costs. The purpose of this article is to give you a general idea of what to expect. Your minimum cost will be around $350 if you prepare your own forms that you download for free from the courts. These forms are complicated and will take a long time to complete. COST #1 - CREDIT COUNSELING CERTIFICATE & BUDGET Budget: $50-$60 One of the first things that you will need to do is to contact a court-approved credit counselor. Counseling sessions take anywhere from 45 minutes to 2 hours. Following this counseling, you will receive a certificate and budget which must be filed with the court along with your bankruptcy paperwork. This has to be done within six months before filing your bankruptcy petition. Many of counseling services offer on-line or telephone counseling. If you have a lawyer, sometimes the fee is part of the cost charged by your attorney. In some cases, this fee can be waived waived or reduced. COST #2 - PREPARING YOUR BANKRUPTCY PETITION Budget: $0 - $800 + A. Bankruptcy Lawyers With the complexities of the new bankruptcy laws, you are wise to hire an attorney. The problem is that the reform bill has made bankruptcy so complicated that attorneys have had to raise their rates. On the low end, I have found some attorneys who charge approximately $800. More likely, you are looking at $1,500 to $2,500 in attorney fees. Some attorneys will let you pay their fees in installments. If the installments are through a financing house, find out what the interest rate is! There may be pro bono (free) services available. Check with your State Bar Association to see if there are any attorneys who will handle bankruptcy petitions on a pro bono basis. B. Document Preparers or Paralegals If you cannot afford an attorney but are nervous about preparing your own form, a document preparer or paralegal can help. Plan on around $200-$400 for these services. Document preparers cannot give you legal advice or represent you in court. C. Debt Relief Agency Attorneys, document preparers, or anyone else engaged in the business of preparing and/or filing bankruptcy forms are considered to be "debt relief agencies," as defined in the Code. A debt relief agency is required to tell you upfront what work will be performed and what exactly it will cost. D. Bankruptcy Forms and Software "Fillable" forms range from $0.00 (provided by the bankruptcy courts with minimal instructions) to approximately $700.00. You really should hire an attorney, but if you cannot afford one, many of the forms offer step-by-step guidance, sort of like income tax software that you may have used. You can find some good software packages for under $50. E. Court Filing Fees Plan on at least a $250-$300 court filing fee. Check with your local bankruptcy court to get the exact figure. COST #3 - MORE TO THE CREDIT COUNSELOR When it's all said and done, you need to get a "pre-discharge bankruptcy education certificate." The average cost is $50. ~~~~~~ This article is not intended to be legal advice, but a simple guide to help you budget and plan for a bankruptcy filing. You can find links to the courts, court-approved credit counselors, attorney searches and affordable software packages at: http://www.bankruptcy-filing.com.