How Much Does it Cost to File Bankruptcy?

Last Updated on January 4, 2025
Written by CPA Alec Pow | Content Reviewed by CFA Alexander Popinker

Filing for bankruptcy can provide much-needed financial relief when debts become unmanageable. However, this debt elimination option does not come without costs. Understanding the expenses involved is critical when evaluating bankruptcy. This article will break down the key costs associated with filing for personal or business bankruptcy.

How Much Does it Cost to File Bankruptcy?

Generally, filing for Chapter 7 bankruptcy costs between $1,338 and $3,938 when including court filing fees and attorney fees. Chapter 13 bankruptcy filings tend to run higher, with total costs between $2,813 and $6,413. The main components driving these expenses are court filing fees, mandatory credit counseling courses, and attorney fees if legal representation is used.

The total cost of filing for bankruptcy depends on several factors, including:

• Type of bankruptcy filed (Chapter 7, Chapter 13, etc.)
• Complexity of the case
• Hiring an attorney versus self-filing
• State-by-state variations in fees

According to Upsolve, the total cost can range from as little as $400 to over $3,000. This includes court filing fees, which are $338 for Chapter 7 and $313 for Chapter 13, along with additional costs such as credit counseling fees, which typically range from $10 to $50.

Another source, Business Insider, provides a broader perspective on bankruptcy costs, stating that the overall expenses can vary from $300 to over $4,000. For Chapter 7 bankruptcy, they report court filing fees of $338 and attorney fees ranging from $1,500 to $3,000. For Chapter 13, the court filing fee is $313, with attorney fees typically between $3,000 and $5,000.

According to Leinart Law Firm, the total cost for filing Chapter 7 bankruptcy is approximately $375 plus attorney fees, factoring in the court filing fee and credit counseling costs. They also note that for Chapter 13 bankruptcy, the total cost is about $325 plus attorney fees.

In a detailed overview from Nolo, it is confirmed that the filing fees are set at $338 for Chapter 7 and $313 for Chapter 13. They emphasize that if individuals cannot afford these fees, they might qualify for a fee waiver or be able to pay in installments.

Real-Life Bankruptcy Cost Scenarios

To better understand how bankruptcy costs translate in real situations, examine these examples:

Case Study 1: Chapter 7 Bankruptcy Costs for an Individual

John is a single truck driver who has accumulated $42,000 in unsecured credit card debt. He decides to file for Chapter 7 bankruptcy with the help of an attorney. Here is a breakdown of John’s bankruptcy costs:

• Court filing fee: $338
• Credit counseling courses: $40
• Attorney fees: $2,500 (average for Chapter 7)
• Printing and copying costs: $60
• Total: $2,938

With these expenses, John can eliminate his credit card balances completely through liquidation bankruptcy.

You might also like our articles on the cost of LLC insurance, CPA services, or forensic accountant services.

Case Study 2: Business Chapter 11 Bankruptcy Costs

ABC Corp is a small business facing multiple lawsuits over unpaid debts. To reorganize, ABC files for Chapter 11 bankruptcy protection. Their costs include:

• Court filing fee: $1,717
• Attorney fees: $15,000 (complex case)
• Accountant fees: $12,000 (financial reorganization)
• Potential asset liquidation losses: $25,000
• Total: $53,717

This example shows how bankruptcy can be much more expensive for businesses, including potential asset liquidation costs.

Main Cost Components

Several key fees make up the total cost of bankruptcy:

Attorney Fees

Hiring a bankruptcy attorney is optional but highly recommended for navigating the legal process. Attorney fees can vary substantially based on factors like legal experience, case complexity, and local demand.

Chapter 7 attorney fees range from $1,000 to $3,500 on average. Chapter 13 bankruptcies incur higher attorney fees of $2,500 to $6,000. Attorneys generally charge flat fees upfront but may also structure payments over time.

Court Filing Fees

The bankruptcy court charges a filing fee simply to open a case. Currently, the filing fee is $338 for Chapter 7 and $313 for Chapter 13. However, low-income individuals can request waivers for Chapter 7 filing fees.

Credit Counseling and Debtor Education

Filers must complete pre-filing credit counseling and post-filing debtor education. These mandatory courses cost $15 to $50 each. Some nonprofit providers offer free or discounted services.

Other Costs

Other minor costs may include fees for document copying, record searches, travel expenses, and missed work. While small individually, these costs add up.

Factors Influencing Bankruptcy Costs

Several key factors cause bankruptcy costs to vary substantially between filers:

• Case Complexity – More complicated cases drive up attorney fees to resolve unique legal issues. Examples include extensive assets, business entanglements, or tax debts.
• Attorney Experience – Hiring an attorney with more expertise in bankruptcy law often comes with higher hourly rates or flat fees. Their knowledge can be invaluable for complex cases.
• State Law Variations – Some states impose additional procedural steps, documentation requirements, and exemptions that affect costs. Local legal norms also influence attorney fee rates.
• Economic Conditions – During financial downturns, more filers enter the market, making attorney services more costly and time-consuming. Inflation also causes fees to rise periodically.

Bankruptcy vs Alternatives

Bankruptcy is not the only debt relief solution. Comparing costs to alternatives like debt settlement and credit counseling is wise:

• Debt Settlement – Settlement companies charge around 25% of enrolled debt to negotiate lump-sum payoffs. While effective, total fees often exceed attorney fees for bankruptcy.
• Debt Management Plans – Credit counseling agencies can negotiate debt payoff plans for monthly fees around $25-50. However, debt management still requires eventual repayment of the full balance.

For high unsecured debts, bankruptcy often makes more financial sense long-term. But each situation should be evaluated carefully regarding costs.

Reducing Bankruptcy Costs

If bankruptcy is the right choice, here are ways to control the costs:

• Negotiate attorney fees whenever possible. Request flat rates rather than hourly billing.
• Search for legal aid organizations or pro bono bankruptcy programs in your state if income eligible.
• Consider reputable self-filing resources to avoid attorney fees. However, the process is much more complex.
• Ask credit counseling providers about sliding scale fees or hardship waivers if their services pose a burden.
• Maintain detailed financial records so your attorney spends less time organizing documents and information.

Expert Tips

Reputable bankruptcy attorneys emphasize these best practices for keeping costs low:

“Compile a complete list of creditors, assets, expenses, debts, and income before meeting your attorney. Thorough preparation saves on billable hours.”

“Be upfront about your budget and ability to pay legal fees. I work with clients to create affordable payment plans for Chapter 13 bankruptcies.”

“After bankruptcy, avoid taking on new debt obligations prematurely. Keep living frugally until your financial house is in order.”

Measuring Value Versus Cost

Understanding perceived value compared to actual costs paid is critical in evaluating bankruptcy services. Surveys of filers reveal:

• 75% agreed the time saved using an attorney was worth the expense.
• 80% felt the total cost of bankruptcy was reasonable given the debt relief outcome.
• 33% wished they had researched costs and prepared finances better beforehand.

While costly, most filers view bankruptcy as a worthwhile investment for resolving crippling debt compared to alternatives. However, better financial education and preparation could improve experiences.

Future Costs

Looking ahead, bankruptcy costs will likely continue rising steadily due to several factors:

• Attorney fees can be expected to outpace inflation, as seen historically. More demand from downturns may also drive up rates.
• Progressively higher court filing fees are likely as judicial budgets face financial constraints.
• The costs of supplementary services like credit counseling and debtor education will also increase with inflation.
• Shifting regulatory requirements could impose new documentation, counseling, or audit costs on filers.

Barring major legal reforms, bankruptcy costs will continue gradually increasing for both Chapter 7 and Chapter 13 in coming years according to current trends.

Additional Resources

Those looking to estimate their bankruptcy costs can use these helpful tools:

• The US Courts Fee Schedule details all current filing fees and related expenses.
• LegalConsumer.com provides cost estimations and lawyers by state.

Conclusion

Filing for bankruptcy offers the benefit of debt relief but at a cost. Typical Chapter 7 bankruptcy costs range from $1,338 to $3,938, while Chapter 13 bankruptcies range from $2,813 to $6,413. These expenses pay for court filing fees, credit counseling, and attorney fees if hired.

Consumers should weigh the costs against debt balances, income stability, and alternative options. However, bankruptcy can provide long-term financial benefits with proper planning.

Answers to Common Questions

What are the main fees and costs associated with filing for bankruptcy?

The three primary costs involved in bankruptcy are:

• Court filing fees – These mandatory fees just to initiate a bankruptcy case generally total $338 for Chapter 7 and $313 for Chapter 13.
• Credit counseling courses – Pre-filing credit counseling and post-filing debtor education courses cost $15 to $50 each. Some providers offer free or discounted programs.
• Attorney fees – Hiring a bankruptcy lawyer ranges from $1,000 to $3,500 for Chapter 7 and $2,500 to $6,000 for Chapter 13. However, legal fees are not required.

In addition, supplemental costs like document copying, mailing, travel, and missed work should be accounted for in the total expenses. The complexity of the case and state-by-state fee variations also affect overall costs.

Is filing for bankruptcy less expensive than using debt settlement or credit counseling?

Bankruptcy can be significantly less expensive than alternatives like debt settlement and credit counseling based on the long-term financial impact. Here is a brief cost comparison:

• Debt settlement companies often charge around 25% of total enrolled debt. Settlement also involves taxes on forgiven debt.
• Nonprofit credit counseling provides debt management plans for monthly fees around $25-50. But total debt must still be repaid eventually.
• Chapter 7 bankruptcy attorney fees range from $1,000-$3,500 with total costs between $1,338-$3,938. This can eliminate unsecured debt completely.

For many individuals, Chapter 7 bankruptcy provides the most affordable path to becoming debt-free. The upfront legal expenses compare very favorably to accumulated debt management fees or settlement costs. However, the best option depends on each person’s unique financial circumstances.