Cost of filing for Bankruptcy + Attorney Fees

If you’re considering bankruptcy, then you probably don’t have a ton of money to burn to hire a lawyer.  Given this, it’s mission critical that you understand how bankruptcy attorneys price their services, and find a lawyer who fits within your budget.  The goal of this article is to provide you with this knowledge by explaining everything you ever wanted to know about bankruptcy attorney fees.

The world of bankruptcy law is divided into two broad categories: consumer bankruptcy and business bankruptcy.  Within consumer bankruptcy, there are two principal varieties: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.

Some lawyers exclusively do business bankruptcy, while others exclusively do consumer bankruptcy.  Within each category, though, attorneys generally do not specialize.  For example, it is not the case that one lawyer will focus on Chapter 7 and another will focus on Chapter 13.  Instead, you should think of Chapter 7 and Chapter 13 as different forms of ammunition in the consumer bankruptcy attorney’s arsenal for getting clients out of debt.

In terms of attorney fees, Chapter 7 is much more affordable than Chapter 13.  For example, attorney fees for Chapter 7 bankruptcy are typically around $1,000, while attorney fees for Chapter 13 will run around $3,000.  Why is there a two thousand dollar difference?  The answer is simple: Chapter 13 involves a lot more work! In Chapter 13, the attorney attempts to defend your ownership of your assets while discharging or reducing your debts. By contrast, in Chapter 7, the attorney merely helps to discharge or reduce your debts.  The result is that Chapter 13 requires much more effort and time on the part of the attorney than Chapter 7.

Although attorney fees for Chapter 7 are much lower than that for Chapter 13, in no way does that mean that Chapter 7 is better for you or more desirable from a financial perspective.  For one thing, the decision as to which chapter to file under isn’t really up to you.  Uncle Sam laid down some rules in the bankruptcy code which specifies the circumstances that you have to meet to file for each chapter.  If you meet those requirements, you can file.  If you don’t meet the requirements, it doesn’t matter what you do, you won’t be permitted to file.

Also, attorney fees are just one component of the cost of filing for bankruptcy.  To get an appreciation for the full cost of bankruptcy, you have to realize that the people who file for bankruptcy are ordinary, middle class folks.  Sometimes, when you file for bankruptcy, you are required to liquidate some or all of your assets (home, car, etc).  If you own a home and you’re like most people, then you don’t want to give it up simply because you’re having trouble paying your bills.  Chapter 13 allows you to get more creative in terms of retaining ownership of your assets.  So although you may be paying a little bit more in terms of attorney fees, you’re also saving a lot more in terms of other life costs.

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