Bankruptcy fees
One of the indignities of going broke is filing for relief which is expensive and getting more so after the Bankruptcy Reform Law took effect in October 2005. Under the new law, bankruptcy attorneys have been made more responsible towards inaccuracies or misinformation in client reports. As a consequence attorneys are now subject to higher liability standards and loads of paperwork and that has in part contributed to skyrocketing filing expense. The Congressional Budget Office (CBO) predicts that the new bill is likely to increase an attorney's costs by $150 to $500. The report also noted that "Some of those additional costs would most likely be passed onto their clients."
Because of mounting expenses in bankruptcy filings, experts suggest those considering bankruptcy as a viable option, to review their decision once more. But, those with bankruptcy as their last recourse must ideally start amassing funds way in advance of filing.
Most debtors consider paying the filing fees; others prefer assistance from a lawyer to resolve their debt problems despite the costs. But some additional fees aren't as obvious or as well-known and could become a major problem, inflating your list of overdue obligations. Here is a glimpse of the real picture that can put you in good, stead and prevent unpleasant surprises along the way.
Cost liabilities in filing for bankruptcy
Attorney Fees - Attorney fees may vary from state to state and within a state.
In the southern district of Florida a bankruptcy firm may charge around $1,000 for a Chapter 7 filing while a flashy firm can charge upto $1,500. A Chapter 13 filing in the same area will cost around $2,500. At one firm in Tampa, Florida a Chapter 7 filing costs $800 and a Chapter 13 filing costs $1500.
The fees of bankruptcy practitioners to contest a Chapter 7 bankruptcy can vary anywhere between $600 to as much as $3500 across the country.
Costs for Chapter 13 cases can range between $1500 to as high as $3500.
Typically, costs to file Chapter 13 bankruptcies are higher than Chapter 7.
Credit Counseling - Consumer credit counseling has become mandatory under the new law. Each of these courses - the pre-filing credit counseling and the pre-discharge financial education course - will cost $50. The debtor must attend these courses regardless of his inability to pay.
The bankruptcy petition -Debtors seeking relief from debts must file a bankruptcy petition.
A petition for chapter 7 filing will cost $299. This includes the statutory filing fee of $245, administrative fee of $39 and a case trustee fee of $15.
The amount for filing a chapter 13 is $274. This includes the statutory filing fee of $235, and an administrative fee of $39.
The Chapter 7 trustee fee is used to pay the trustee, who doesn't receive a salary. Chapter 13 trustees are paid a percentage of the funds they preside over, under the terms in the repayment plan. Experts quote it to be around 10 percent but it can vary depending upon the percentage set by the U.S trustee of any particular region.
Case amendments - Amendments are very common in bankruptcy filings. It can cost a debtor $26. They typically arise from last-minute entries, such as adding a creditor.
Reopening a bankruptcy case - Reopening a case for a Chapter 7 bankruptcy costs $220; for a Chapter 13 bankruptcy $150.
Conversion costs from Chapter 13 to Chapter 7. A conversion from Chapter 13 to Chapter 7 bankruptcy costs $15.
Experts say most debtors change from a Chapter 13 bankruptcy to a Chapter 7 when they are found financially inadequate to match up against the repayment plan drawn under Chapter 13 bankruptcy.
However conversions from a Chapter 7 bankruptcy to a Chapter 13 do not require a fee. Albeit rare, such conversions occur when the debtor fails the means test.
The 'means' test is a calculation that determines whether a person is eligible to erase his or her debts or whether he has the "means" to pay off the creditors. In such cases a court will compute the average income for six months prior to filing and compare that amount to the median income of the state.
Splitting a case Splitting a case or "division of a joint case" can cost Chapter 7 filers $220 and Chapter 13 filers $150. This typically occurs between married couples.
Compelling abandonment of property: A debtor may compel 'abandonment of property' but it will cost him $150. Such a situation arises, when the court finds that the property held by the debtor is not worth selling and creditors cannot be repaid with the acquired amount.
Withdrawing reference: Experts describe this as a rare occurrence in bankruptcy cases. It costs $150.
District courts have jurisdiction of all bankruptcy cases. It refers cases to bankruptcy courts.
Creditors or debtors may request the district court to withdraw reference from a bankruptcy court when either discerns that a case involves issues that are not addressed in bankruptcy and it should at best be handled by the district court.
6. Ways to scrape up cash:
If you are determined about filing bankruptcy and is clueless about procuring the resources required to pull it off, attorneys suggest the following options for planning it:
*Stop paying some of your bills: Abstain from paying all those debts which you plan to erase through bankruptcy, such as credit card balances or medical bills. Abstain from using credit cards six months prior to your bankruptcy filing. Save the money from being spent on paying credit card balances to pay up for bankruptcy expenses.
*Sell non-exempt property: Consult your lawyer for a ledger of non-exemptible properties. Since it varies from state to state an attorney may be your best guide in determining this. Take counsel from your attorney to find out which property you're likely to forfeit in a filing and consider selling that to raise funds for your legal proceedings.
*Seek help from friends and family: It is worth a try. Since a loan under the circumstances is tricky and hard to obtain besides being risky, approach your close circle of friends and relatives for assistance in this matter.
*Seek a waiver: The new bankruptcy law allows petitioners to apply for a waiver that could save them court filing fees, which are about $200 for a Chapter 7 filing.
*Tapping retirement fund: New legislation allows people with homes in Katrina-affected areas, to withdraw or borrow up to $100,000 from their retirement funds without penalty. Typically, this should be the last resort for raking up money.
*Look for cutting costs: Look for an attorney willing to handle your case for free or find a "pro bono" service. The Consumer Bankruptcy Assistance Project in Philadelphia is one such organisation that assists desperate and low-income groups to get legal assistance at little or no cost.
Enduring bankruptcy at the psychological level has never been easy. The increase in bankruptcy cost proceedings have made it even more difficult for debtors who are already tottering under a huge burden of debt. Cost rise in every aspect of the money market is an inevasible reality and one has to cope with it. As in other areas, so for legal services inflated rates has to be dealt with. Good planning, circumspection and wise decision making are the only keys to beat it.
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