There are two common types of bankruptcy that consumers file for – chapter 7 and chapter 13. If you file under chapter 7, then all your non-exempt assets and property is sold off to pay back the creditors. While in chapter 13, the debtor is allowed to prepare a repayment plan. This plan is based on the debtor’s income and convenience and it is the debtor who in compliance with a trustee and a judge decides the terms of repayment of all his debts.
Chapter 7 is a little easy form of bankruptcy as it gets rids of debts that you can’t pay back. But filing for chapter 7 is the most difficult as you have to prove that you actually have nothing to sell and pay back the debts. Chapter 13 leads to complete elimination of debt but it is quite difficult to bounce back from.
When you file for any kind of bankruptcy you have to pay certain bankruptcy fees. There are different kinds of bankruptcy fees associated with the type of bankruptcy you are filing for such as bankruptcy filing fees, credit counseling fees, administrative fees, bankruptcy attorney fees, petition preparer’s fee. The fees can go down if you file the fees yourself without the help of any attorney or a petition preparer. However, taking professional help is always better.
When you file for chapter 7 and take the help of an attorney for filing the petition, you have to pay the bankruptcy fee which is the filing fee and the attorney fees upfront. There is a possibility that you can work out an installment procedure but still you would have to pay some sum as an advance.
For chapter 13 bankruptcy, you have to pay the bankruptcy fees through monthly installments that last through the period of your bankruptcy. The payment is also made to the trustee.
The most expensive type of bankruptcy is chapter 11. The reason for its high cost is that has two elements – a repayment plan and a reorganization plan. The reorganization plan is to convince the court to let you continue with your business and assure it that you would turn in a profit soon. The repayment plan is for the creditors… about how will you back their money over a period of years. Because of these two elements, the cost of the attorney is generally very high as this type of bankruptcy involves lot of negotiating which means a lot of working hours!
To minimize the bankruptcy fee in this case, you have to lower down the fees of the attorney. You can do that by having an agreement with the attorney in which you agree to do all the paperwork, all the filing, all the planning, and the lawyer is just there just in the capacity of a legal advisor or a coach who guides you, answers your questions, or provide you with forms.
Not only in chapter 11 bankruptcy, but in all types of bankruptcy, the largest chunk of your bankruptcy fee goes into clearing the attorney’s fees. Even though after you have declared bankruptcy, all your debts are automatically frozen but still it is important to work out a payment plan with your lawyer so as to make the fee-paying more easy on your pockets.
Other way to reduce your legal bill is to do research about various kinds of legal options available. You should have all the details and information about your credit statements. You should have all your paperwork in order. If you take out time to get well-informed about the current bankruptcy scenario as well your situation, then the lawyer would have less to do which would automatically translate into smaller bill.
There is also a provision in the bankruptcy code according to which you can pay your bankruptcy fees such as the filing fees and the administration fees in installments. An application is presented to the court stating that the debtor can’t pay the bankruptcy filing fees in full and would do so in four equal installments.
When you declare bankruptcy, you have to pay bankruptcy fees. Different chapters have different costs which an attorney would let you know. There are various ways through which you can reduce these costs.