Filing for Bankruptcy can be an investment towards obtaining a fresh start and creating a healthy financial future. The old saying, “it takes money to make money,” also applies to filing Chapter 7 Bankruptcy. This is a surprise to many who are seeking to repair their tenuous financial situation.

For example, a common question you may be thinking is, “Is bankruptcy right for me?” There are certain variables that a bankruptcy quiz provides that could help you estimate cost, qualification, and alternatives.

Let’s discuss how a Chapter 7 bankruptcy can be affordable to help you make the most informed decision whether bankruptcy is right for you.

Affordable Chapter 7 Calculator

One of the best ways to determine the cost of a bankruptcy is to understand what levers go into the total cost. If you file with an attorney, that would be more expensive than filing without an attorney. Also, if you would like a free consultation with an attorney instead of a paralegal, you may have more interaction with the attorney, which may yield a higher cost.

As such, the free calculator below helps you estimate the costs specifically to what you are looking for (attorney interaction, etc.). It will give you an all-in estimate for an affordable Chapter 7 bankruptcy.https://tryascend.com/embed/qualify_attorney_fees/route/sbtcaffordable?title=Find+Affordable+Attorney+Near+You+And+Estimate+Cost+(Takes+2+Minutes)

How Chapter 7 Bankruptcy Works

According to the IRS, Chapter 7 is one of the most common forms of bankruptcy. Subject to the Chapter 7 means test, filing under this chapter is available to individuals who cannot make regular payments toward their debts. Unsecured debt in Chapter 7 that is subject to discharge can include medical bills, credit cards, and certain lines of credit. 

In general, Chapter 7 is the fastest and least expensive of the bankruptcy filing options, although it will remain on your credit report for years. In Chapter 7, a bankruptcy trustee is appointed to sell certain debtor assets to compensate creditors, in full or in part, thereby allowing the debtor a “fresh start” after the bankruptcy discharge.

Steps in filing a Chapter 7 Bankruptcy

Barring complications or highly unusual circumstances, the following steps outline the chronological procedure of filing Chapter 7 Bankruptcy:

1. Initial attorney meeting, usually a free, no-obligation consultation to discuss your case, options, and guidance on how to proceed.
2. Gather all information and documentation needed to prepare your bankruptcy filing petition and schedules. 
3. Prepare the bankruptcy petition.
4. Complete the Credit Counselling course. The Certification of Completion needs to be part of the bankruptcy petition filing.
5. Review, edit and sign the petition and schedules.
6. Filing of the bankruptcy petition and schedules along with the payment of the filing fee.
7. The Court assigns a docket number and a Chapter 7 Trustee to your case.
8. The Court schedules your 341(a) Meeting of Creditors.
9. Attend the 341(a) meeting of creditors with your attorney, and the Chapter 7 Trustee reviews the outcome. 
10. Complete the Financial Management course. The Certification of Completion needs to be filed with the Court.
11. The Trustee files a Certification of No Assets.
12. The deadline for creditors to object to discharge passes.
13. The Court enters your discharge order.
14. You receive a discharge letter in the mail.

Challenges of filing Chapter 7 Bankruptcy

Filing for bankruptcy can be a difficult and extremely time and information-intensive process. Having an experienced Chapter 7 Bankruptcy lawyer as your advocate can be the wisest investment you make to obtain the best advice, advocacy, and assistance in avoiding complications.  Common complications in your Chapter 7 Bankruptcy case include:

• Failure to file all required schedules with the court;
• Failure to pay the filing fee in full or in installments, if approved;
• Motion for Relief from Automatic Stay filed by a secured creditor;
• Failure to complete the Credit Counseling or Financial Management Courses and file the Certification of Completion with the court;
• Not attending the 341(a) Meeting of Creditors;
• Failure to provide the Trustee with the required documents and information,  causing a new 341(a) Meeting of Creditors to be scheduled;
• Lying under oath to the Trustee;
• Adversary Proceedings filed by a creditor;
• Objection to Discharge filed by a creditor or the Chapter 7 Trustee;
• The Trustee found and seized unexempted assets and must sell them for the benefit of creditors;
• The Trustee asserts the debtor does not pass the means test and therefore does not income-qualify for Chapter 7;
• The debtor’s case is subject to random audit by the U.S. Trustee’s office.

Chapter 7 Costs 

There are 3 main areas of costs when filing a Chapter 7 bankruptcy; required courses, court filing fees, and attorney fees. You will see each of the following below.

Credit Counselling and Financial Management Courses

You are required to take two courses before the court enters your bankruptcy discharge. The first course is a credit counseling course. Your case will be dismissed if this course is not taken. The second is Financial Management, formerly known as “debtor education.” 

Both these courses are designed to assist the debtor in understanding and planning for the management of their financial situation. It takes around an hour to complete each class.

Costs of these classes can vary based on location and availability, but under $100 is standard. “For Cheap” tips:

• Taking both courses with the same provider for a discounted price
• Shopping for the best or reduced price
  • Some providers may offer reduced or even free classes based on an individual’s ability to pay. Always ask for a discount.
• Taking the courses at your attorney’s office

Filing Fees

In general, filing fees are in the $300-400 range. You are expected to pay the filing fees when you file the bankruptcy petition.

“For Cheap” tips:

• If you prepare your Chapter 7 bankruptcy filing yourself, you can file an application to waive the court filing fee. If the court approves your application, your filing fee can be waived.
• Apply to pay the filing fee in installments. If granted by the court, you will not be required to pay the full amount upfront but can instead budget the payments. 

Attorney Fees 

The cost of retaining an experienced bankruptcy attorney can be equated to a sound financial investment. Many complicated issues may arise during a bankruptcy case, and the filings are extremely time and detail-intensive.  

While an individual can choose to represent themself, it must be noted that judges, judges’ staff, clerk, or clerk’s staff are not permitted to provide legal advice. Legal advice is very broadly construed and can include what would seem to be simple questions such as who should receive notice, the proper court/jurisdiction to file in, or helping you complete the correct forms. 

The right of an individual to represent themselves in a bankruptcy case, called “pro se,” can appear to be cost savings. Still, even courts recommend that this be carefully considered in light of the complexity of bankruptcy law and court procedure.

Although the bankruptcy cost in your state are the most significant part of your investment in a healthy financial future, there are ways to reduce those costs.

Filing Chapter 7 Bankruptcy for Cheap

• Thoroughly consider the advantages of investing in the services of a Chapter 7 bankruptcy attorney.
• Take full advantage of the free, no-obligation free consultation by asking many questions.
  • Ask about discounts
  • Ask about installment/payment plans 
  • Seek questions about affordable fees and sliding scale fees
  • Ask about any Federal Assistance Programs you might be eligible for
  • Ask about any State or Local Assistance Programs you might be eligible for
  • Understand alternatives that might be available to you, such as doing much of the leg work yourself 
• Thoroughly weigh the pros and cons of proceeding “pro se.” 
• Look for legal aid clinics or discounted legal aid programs
• Ask your employer if your company benefits include a legal services discounted plan
• Contact your local/state Bar Association to get a listing of attorneys who have “pro-bono” (free) services as part of their law firm’s bankruptcy practice
• In some cases, you could find a bankruptcy attorney with $500 in attorney fee.

Affordable Alternatives to Chapter 7 Bankruptcy

If you are unable to qualify for a Chapter 7 bankruptcy, here are some affordable alternative options that you can consider.

Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy, you would have a monthly payment plan. Many bankruptcy attorneys charge his/her fees through the Chapter 13 payment plan. If you have limited disposable income and recently filed a Chapter 7 bankruptcy, this may be an alternative to consider.

If you are seriously consider this option, check out this video covering Chapter 13 bankruptcy.

Debt Settlement

With debt settlement, you would negotiate or a firm would negotiate the total balance lower. The debt settlement fees can be more affordable than Chapter 13 bankruptcy, especially if the amount you are settling is low. That said, Chapter 7 bankruptcy is often cheaper than debt settlement.

Debt Management

With debt management, a credit counseling agency would negotiate the interest rates of your credit card debt. With this option, the debt management fee is often between $20-$50 per month, but that fee is often carried out over 5 years. Thus, you may be paying $3000 in debt management fees vs $1500 in Chapter 7 attorney fees. Thus, Chapter 7 bankruptcy may be more affordable than debt management.

Debt Payoff Planning

If you are able to afford the debt by potentially reducing expenses or increasing income, you can potentially go through debt payoff planning. In this option, you would line up your debts and try to put extra towards your debts each month to get out of debt faster.

Summary

Chapter 7 bankruptcy is often the least expensive debt relief option. As such, you can find ways that Chapter 7 bankruptcy can be even more affordable if you are eligible for a fee waiver or find a bankruptcy attorney that charges cheaper fees.

Hopefully, this article has been helpful to help you find an affordable Chapter 7 bankruptcy. Please reach out to us if you have any other questions.