7 Cheapest Ways to File Bankruptcy
9 MIN READ
Published December 14, 2023 | Updated January 23, 2024
Bankruptcy can be an effective solution to resolve overwhelming debt and get a fresh start. However, it comes with short and long-term costs that you should consider before you make a decision. Short-term costs include the costs of filing and attorney fees. The cheapest way to file for bankruptcy is usually Chapter 7, which has lower attorney fees.
The long-term costs of bankruptcy include a damaged credit score and inability to borrow credit. On the other hand, you’ll receive immediate relief when you file for bankruptcy through the automatic stay.
How Much Does Filling for Bankruptcy Cost?
For individuals, there are two main options for filing bankruptcy: Chapter 7 and Chapter 13. Each of these options comes with certain costs, such as petition fees, attorney fees, and counseling session fees. However, Chapter 7 is usually the cheapest way to file bankruptcy.
The filing costs for bankruptcy are set by the government. The petition fee for Chapter 7 bankruptcy is $338. You can also expect to pay $1,500 to $2,500 in lawyer fees. However, if your case is very simple, you may be able to find an attorney to represent you for as low as $1,000.
Before you approach an attorney for filing Chapter 7, we recommend doing a quick median income test online to see if you qualify. This will allow you to determine whether it’s worth spending money for an attorney for filing Chapter 7, or if Chapter 13 would be a better choice.
Chapter 13 cases are more expensive because they’re complex. The petition fee for Chapter 13 bankruptcy cases is $313, and attorney fees can range from $750 to $4,500. For both cases, you’ll need to attend credit counseling sessions, which are usually affordable and cost $10 to $50.
Teresa Dodson, a debt expert and the founder of Greenbacks Consulting, offers her advice about filing for bankruptcy. “If you don’t qualify for Chapter 7, I would highly recommend using debt settlement as an option,” Dodson shares. “To me, that's better than Chapter 13,” she adds.
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Is Chapter 7 a Good Option for Low-Cost Bankruptcy?
Chapter 7 bankruptcy is the cheapest way to file bankruptcy because it offers options to reduce or waive fees and costs. If your case is fairly simple, you may be able to file bankruptcy without professional legal advice, which can help you save a considerable amount of money.
Additionally, if your income is below 150% of your state’s poverty level, you may be able to get the filing fee waived or pay it in installments.
Is Chapter 13 a Good Option for Low-Cost Bankruptcy?
Chapter 13 bankruptcy is usually more expensive than Chapter 7 because it's more complex. Attorney fees account for the largest portion of the costs involved. However, you may be able to pay these fees over time as a part of the court-ordered payment plan.
Unlike Chapter 7, you won’t have to pay the attorney fees upfront. Due to the complexity of Chapter 13 cases and the repayment plan, hiring a lawyer is important to ensure you successfully complete the monthly payments and get a discharge.
7 Tips To Spend Less While Filing Bankruptcy
Bankruptcy is often considered a last resort option due to its long-term financial implications and its effect on your credit report. We recommend you thoroughly consider and compare all debt relief options like debt settlement, debt management, and debt consolidation before deciding if bankruptcy is right for your financial situation.
Once you’re sure of your decision, consider these tips to minimize expenses during the filing process.
1. Do-It-Yourself Bankruptcy Filling
We recommend working with a bankruptcy lawyer because their experience and knowledge of the bankruptcy code can help you file documents on time, lower your stress, and help you navigate the process efficiently. However, it’s possible to file bankruptcy on your own. In fact, if your case is straightforward, this can be the cheapest way to file bankruptcy.
If you’re filing for Chapter 7, you may not need to hire a lawyer if you educate yourself about the bankruptcy law and process first and explore the legal help resources available online. However, we still recommend hiring an experienced lawyer if you’re considering filing for Chapter 13.
2. Use Online Services vs. Traditional Methods
There are many tools available online to help you navigate your way through bankruptcy. However, it's important to note that while you can get help and download the bankruptcy forms online, you’ll still need to file the forms in person at the local bankruptcy court.
Only bankruptcy lawyers are Electronic Case Files (ECF) Certified and can file forms online with courts. Another option is to use an online bankruptcy service or a non-profit like Upsolve that allows you to file for bankruptcy for free online, which is the cheapest way to file bankruptcy.
3. Apply for Fee Waivers
If you’re a low-income debtor filing for Chapter 7, you may be able to have the $338 filing fee waived or pay it in installments. To get a fee waiver, you’ll need to demonstrate that you can’t pay the fee in installments and your income is below 150% of your state’s poverty level.
Filers also need to take two courses during the bankruptcy process before their debts are discharged: a credit counseling course and a Debtor Education course. The cost of these courses can also be waived if your income is low enough that you can’t afford to pay them.
4. Setup Installment Plans
If you’re not eligible to get a bankruptcy petition fee waiver, you can still apply to pay the filing fee in installments. The installment plan can’t extend longer than four payments or 120 days after you file for bankruptcy.
If the bankruptcy court approves your application, it’s important to pay the installments on time.
5. Find Legal Aid and Pro Bono Services
If you can’t afford an attorney, there are still options to get help with your bankruptcy case. Bankruptcy courts may have free legal clinics to help people file the petition on their own.
You can also find pro bono attorneys and legal aid groups that can work for free. If you qualify, this can be the cheapest way to file bankruptcy. To find pro bono attorneys and free legal aid, call your state bar or Legal Aid Society in your area.
6. Negotiate Attorney Fees
Your first consultation with a bankruptcy attorney is typically free. Use this free consultation to gather more information about what their fees are and if you’ll be able to pay the fees in installments.
Attorney fees depend on the type of bankruptcy you’re filing and the complexity of your case, so use the opportunity to negotiate the fees if your case is simple and straightforward. If you’re filing for Chapter 13 bankruptcy, ask if you can pay the fees in installments.
7. Apply for Government Assistance Programs
A variety of programs and associations provide free or low-cost legal aid, which is one of the cheapest ways to file bankruptcy. You’ll be assigned to an attorney who can help you with the bankruptcy case if you qualify.
The American Bankruptcy Institute has a list of member attorneys in all states and pro bono resources you can explore. The bar association in your state and organizations like the Legal Services Corporation can also help.
The Bottom Line on the Cheapest Way to File Bankruptcy
Filing for bankruptcy takes time, preparation, and money. Hiring a good bankruptcy law firm is one way to file. However, if you’re looking for the cheapest way to file bankruptcy, see if you can find legal aid or pro bono resources in your area.
Another option is to file bankruptcy on your own if you pass the means test and are filing for Chapter 7, and your case is fairly simple. Apply for a filing fee waiver or installment plan to ease the burden further if you qualify for an exemption.
Most importantly, once you’ve successfully received a bankruptcy discharge, invest in learning more about personal finance and good credit habits to avoid the situation in the future.