Bankruptcy Costs / Attorneys Fees
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The 2005 bankruptcy reforms created a demand for bankruptcy law firms to help consumers with the new regulations and costs. While many law firms still practice bankruptcy on the side, the increased specialization of the law surrounding bankruptcy has increased the amount of bankruptcy-focused firms. Because of the variety of law firms now available, a debtor looking to file should understand the fees and attorney costs associated with a bankruptcy filing before shopping for a bankruptcy attorney.
Common Bankruptcy Fees
Two expenses are required for every bankruptcy: a filing fee and credit class fee. The filing fee is the cost charged by the federal bankruptcy clerk to accept a petition. Fees will vary slightly depending on the jurisdiction, but generally these run around $310. This is roughly the same amount charged for the filing of any lawsuit. This fee frustrates many consumers who are already financially burdened as the filing fee must be paid up front before the clerk will accept the petition.
The second standard fee is for two classes: a credit counseling course and a post-bankruptcy debtor education. All consumers --those filing for Chapter 7 or Chapter 13 --are required to take a credit counseling class from an approved vendor prior to the filing of their bankruptcy paperwork; the cost runs between $15 and $30, though the fee may be waived. The idea was to require consumers to become educated in financial decision-making in the hopes that the debtor would be able to make better financial decisions after bankruptcy. After filing for bankruptcy but before getting a discharge, the debtor must take another class -- a debtor education course -- on how to manage money, cut expenses, repair credit, and budget; the cost will also vary depending of the vendors in a jurisdiction, but usually will run between $50 and $100 (this fee can also be waived).
Although most attorneys now offer free consultations for the first meeting, the biggest expense for any bankruptcy is usually the attorney’s fees. These also vary by state and jurisdiction, but can range anywhere from a $500 to $6,000, depending on the complexity of the case and which chapter is filed. Many attorneys charge a flat fee for filing a bankruptcy petition, although a few still bill at an hourly rate. The cost varies depending on an attorney’s expertise and staff. Many firms that specialize in bankruptcy law actually charge a lower fee because they operate a volume business where one attorney may supervise multiple paralegals. They can charge a cheaper rate because they are using a paralegal to perform some of the bankruptcy work, rather than an attorney for the whole bankruptcy. The use of paralegals can help reduce expenses, but may also create some risks in the quality of representation.
A higher attorney fee does not always mean better representation and a person should always ask a bankruptcy attorney how their fee is calculated. The attorney's fee could include the filing fee but some firms require that the debtor pay this separately. Another consideration is if the attorney accepts payment plans. Some attorneys require a partial fee up front prior to filing your case, while requiring the balance to be paid over the course of the bankruptcy. The affordability of the fee and payment options are only one factor to consider when deciding on hiring a bankruptcy attorney.
Other Fees and Costs
Occasionally, a few other expenses arise during the course of the bankruptcy. A debtor may be required to produce copies of deeds, titles, or tax returns. If the originals cannot be found, the debtor will be required to pay for replacement copies. These types of expenses are nominal when compared to the filing fees or attorney fees. Regardless of which attorney is hired or which fees apply, a debtor should understand the fee structure and his or her obligation before deciding to hire an attorney to avoid any unpleasant surprises during the bankruptcy.