The cost of a cheap bankruptcy varies according to the complexity of the filing and the type of bankruptcy filed. The two types used by many individuals are the chapter 7 and chapter 13 proceedings. In the first the individual is liquidating their assets entirely and discharging all eligible debts; in the second, the courts work out a payment plan for the individual and at the end of the plan, the bankruptcy is discharged.
Save on Filing
Depending on how complicated a person’s financial balance sheet is, the chapter 13 filing can be expensive due to attorney’s fees. However, if the filing can be done without legal assistance, the costs can be limited to the administrative filing fees. For a chapter 7, the filing fee is higher, but again, if attorney assistance is minimized, costs are kept down.
Bankruptcy lawyers are not the only option for legal assistance. Many paralegal firms offer their services at a fraction of the cost, and can take care of everything except representing the person in court. When choosing lawyers or paralegals, shop and compare local rates as they are likely to have a lot of variation.
If an attorney is hired, limit their services to the proper legal preparation of the documents. Incorrectly filled out forms can cost debtors extra administrative or refiling fees, so take the time or pay to have it done right the first time. There is also software available to instruct people on filing their bankruptcy; although the individual gains a better understanding of the process, this can be a costly option, so weigh this against having the job done for you.
Instead of using legal assistance or software, the debtor can download the forms from the US Bankruptcy Court site and fill them out on their own. The information must be accurate, so this option is reserved for people comfortable with the process. Failing to include all applicable debts could affect proceedings.
After Court
Individual debtors can save on bankruptcy filings by using paralegals, minimizing attorney involvement, or filing the documents themselves. When the debtor has been seen in court, the end result depends on the type of filing. A chapter 7 discharges all debts, while a chapter 13 sets up a plan for the debtor to repay.
In the first consideration, several things can happen. First, all debts may be excused (school loans not included,) and shown as discharged on the individual’s credit report. The judge may also rule a ‘presumption of abuse’ on the debtor’s part, and dismiss the case. Another possibility is a ruling for the filing to be converted to a chapter 13 with the person’s permission. If all debts are discharged, the debtor must follow up with the major credit reporting agencies to ensure the negative reports are removed.
Regardless of the cost of the bankruptcy, the aftereffects will cost a person for months or years to come. People considering filing a chapter 7, 11, or 13 should seek debt counseling first. The consequences of going bankrupt include incurring a mark on credit reports which can hinder future purchases and even prevent a person from being hired by employers.
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