Filing bankruptcy is an important step for many businesses and individuals struggling with debt, law suits, foreclosures, and other issues that “trigger” their need for financial relief. For the majority of businesses and people that file bankruptcy, the debt relief they obtain in bankruptcy vastly outweighs the cost of filing bankruptcy. This is especially true where bankruptcy may be the only thing standing between a person/business and foreclosure on their real property, repossession of their car, or a turnover of their levied bank account funds. 

Despite the large amount of relief bankruptcy can provide, the cost of filing bankruptcy is certainly a relevant consideration. How much does it cost to file bankruptcy? This is an overly broad question without first consulting with an attorney about a course of action. What kind of bankruptcy exactly? An individual case, joint case, or business case? A liquidation or a reorganization? Chapter 7, Chapter 13, or a Chapter 11 case? If a Chapter 11 case, a traditional Chapter 11 case, a small business Chapter 11 case, or a Subchapter V case? Aside from standard court costs, and attorney retainer fees, if the bankruptcy case is a reorganization bankruptcy, how much is to be disbursed to creditors over the applicable period of the plan of reorganization?

The Cost of Filing Bankruptcy with Bankruptcy Attorneys Fees

Bankruptcy is highly regulated and the cost of filing bankruptcy varies from case to case. The bankruptcy court requires both the person or business filing bankruptcy to disclose all of their financial information to the court, including how much they paid to their bankruptcy attorney. In addition, in Chapter 7 and Chapter 13 bankruptcy cases, the bankruptcy court has standardized the fees normally charged for those services. A Chapter 7 retainer fee of $2,500.00, and a Chapter 13 retainer fee of $3,500.00, are considered standard. There are some other variations on these standardized fees, depending on the particular bankruptcy court. In a Chapter 11 bankruptcy case, there are no standardized fees, and the retainer varies based upon the complexity of the case. Chapter 11 retainer fees can be significantly higher than Chapter 7 or Chapter 13 retainer fees considering the increased complexity of a Chapter 11 case. These initial retainer fees generally do not include some kinds of complicated, post–bankruptcy filing work that may be required in a case, such as representation of a debtor in an adversary proceeding, which is a federal civil case associated with the underlying bankruptcy case, or in contested matters, which are motions and plenary hearings before the bankruptcy court in the main bankruptcy case.

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Bankruptcy Filing Fees

The bankruptcy court sets standard filing fees for each kind of bankruptcy case. These fees generally have to be paid in full at the time of the filing of the bankruptcy case. Currently, these fees are $313.00 for a Chapter 7 case, $383.00 for a Chapter 13 case, and $1,738.00 for a Chapter 11 case. Experienced bankruptcy attorneys pay these fees electronically at the time of the filing of the petition. Alternatively, with court permission, these fees can be paid to the court in up to four (4) installments. In those instances, debtors must make periodic payments directly to the bankruptcy court. It’s highly recommended that bankruptcy filing fees be paid in full, and electronically, at the time of the filing of the petition. 

Credit Counseling and Debtor Education

Individual debtors must complete online bankruptcy courses, which add to the cost of filing bankruptcy. The first course must be completed before the bankruptcy petition can be filed with the bankruptcy court, and is called pre-filing credit counseling. There are many companies that offer these courses, and the prices drop every year. Currently, a standard pre-filing credit counseling course will cost about $15.00. These courses take about 1 hour to complete. The second course, called debtor education, also costs about $15.00, and takes approximately 2 hours to complete.

Chapter 13 and Chapter 11 Plan Payments

In reorganization bankruptcy cases, the cost of filing bankruptcy includes individuals and businesses making payments to their creditors through a plan of reorganization. In a Chapter 13 case, these payments begin in the first month after the filing of the petition. In a Chapter 11 case, these payments begin months into the case, or longer, and only after the bankruptcy court has confirmed a Chapter 11 plan of reorganization. Plan disbursements are generally the largest cost in a reorganization bankruptcy. However, in many cases, these disbursements can amount to “pennies” on the dollar owed to the Chapter 11 debtor’s creditors.

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Chapter 11 Quarterly Fees

In a traditional Chapter 11 case, a debtor must pay quarterly fees to the Office of the United States Trustee. These fees are based upon the debtor’s disbursements for the relevant quarter, and fees are on a sliding scale. This fee schedule can be found here: Failure to pay quarterly fees can result in the dismissal of a Chapter 11 case, or conversion of the case from Chapter 11 to Chapter 7. In Subchapter V, which is a type of Chapter 11 bankruptcy, these quarterly fees are not charged, which is a benefit of electing Subchapter V.

Accountants, Special Counsel, Auctioneers, and Other Professionals

In considering the cost of filing bankruptcy, individual and business debtors frequently require the services of professionals to assist in their liquidation or reorganization. The most common types of professionals retained by debtors are accountants, appraisers, auctioneers, brokers, and special counsel. In a reorganization bankruptcy, such as Chapter 11 and Chapter 13, the bankruptcy court must pre-authorize a debtor’s retention of these professionals. In addition, before these professionals are paid by a debtor, the bankruptcy court must approve the professional’s fees through a process called a fee application. 

Consultations to Discuss Cost of Filing Bankruptcy with Middlebrooks Shapiro

The most affordable, and possibly the most crucial, step-in for an individual and business considering bankruptcy is a free initial consultation. In most cases, there are many bankruptcy options that may work for a certain individual or business. Finding the best option takes skill, experience, and careful consideration. This is why it’s crucial to consult with experienced bankruptcy attorneys, like those at Middlebrooks Shapiro.

Our team specializes in all aspects of personal bankruptcy, business bankruptcy, as well as mortgage loan modification and ABCs. If you are worried about the cost of filing bankruptcy outweighing the relief, schedule a free consultation with one of our attorneys. Our team will help you navigate the many options available and find the right one for you.