Chapter 7 bankruptcy offers many debtors who are struggling with unpaid bills the opportunity for a fresh financial start. The process typically takes four to six months to complete, and you can file on your own or with the help of an attorney. Certain costs are associated with filing Chapter 7; be sure you're prepared for the expense before you begin the bankruptcy process.
The federal bankruptcy code establishes the filing fees for Chapter 7 bankruptcy; these fees are updated periodically. As of June 2012, the filing fee for a Chapter 7 bankruptcy case was $306. This includes a $245 case filing fee, a miscellaneous administrative fee of $46 and a trustee surcharge of $15. The trustee is an individual appointed by the bankruptcy case to oversee your Chapter 7 filing. If you're unable to pay the filing fee, you can apply for a hardship waiver with the bankruptcy court or you can petition the court to pay the fee in installments.
Legal fees typically result in the biggest cost for Chapter 7 debtors. According to a May 2012 report from CNN Money, the average cost of hiring a bankruptcy attorney for a Chapter 7 case has increased to approximately $1,500. Bankruptcy attorneys can charge anywhere from several hundred to several thousand dollars to complete a bankruptcy case. Their services typically include completing and filing your bankruptcy petition, representing you at the meeting of creditors and helping you estimate the value of your non-exempt assets.
Loss of Property or Assets
In a Chapter 7 bankruptcy filing, your debts are wiped clean, but you have to give up some or all of your assets in exchange. Federal and state bankruptcy guidelines allow you to exempt certain property and assets up to a specific amount. Some states have more generous exemption limits than others and some states require you to use their exemption guidelines versus those offered by the federal government. If your property or assets exceed the amount of value you're allowed to exempt, you may have to give them up. Chapter 7 allows you to walk away with no debt, but you also risk walking away without your home, car or personal possessions.
In addition to the financial costs associated with Chapter 7 bankruptcy, you must also consider some intangible costs. While the purpose of filing bankruptcy is to seek relief from your debts, the process itself can generate a significant amount of stress. Even though your creditors are no longer contacting you about the debt, you may still be facing worry or uncertainty about what your financial situation will be like after the bankruptcy. Some debtors also associate filing bankruptcy with a sense of failure or irresponsibility, which can create additional emotional or mental stress. Filing bankruptcy also negatively impacts your credit, which can cause you to pay more interest for any credit you obtain in the future.
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