Filing for bankruptcy can be expensive or it can be downright dirt cheap. In fact, the filing fee for Chapter 7 bankruptcy is $299, and for Chapter 13 $274 (figures are accurate as of this writing).
But if you stop there, you may think that filing for bankruptcy can be a walk in the park, money-wise. That's where you're wrong.
Consider a recent client who filed his Chapter 7 bankruptcy for $299 - the cost of the filing fee alone. No lawyer involved, and he put the documents together without any paid help whatsoever. He did a very good job of it, too. A lot of studying and research on the types of bankruptcy, needed forms and procedures made him confident that he didn't need to spend any money on a lawyer.
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After all, he was filing for bankruptcy - how could he be expected to spend money for an attorney?
Six weeks post-filing he was in my office because he was being forced to give up his home to the bankruptcy trustee.
What happened? This intelligent and well-prepared gentleman has filed a Chapter 7 bankruptcy without hiring or paying for a lawyer in the belief that he could do it on his own. And he could. The problem wasn't whether he could do his own bankruptcy, but whether he had the ability to make the right choices when taking steps to get out of debt.
The end of my client's story is a happy one, though a painful lesson was learned. He's going to get to keep him home because we converted his case from Chapter 7 to Chapter 13, which will allow him to reorganize his personal finances and repay a portion of his debts over time. In exchange for making payments, he gets to keep his home.
The process of converting his case, however, was costly. In fact, rather than spending a relatively small sum on filing for Chapter 13 bankruptcy he had to pay a far larger legal fee to get him out of the hole he'd dug for himself originally.
We had to file motions with the court to get permission to convert his case from Chapter 7 to Chapter 13 (there's no automatic right to do this, so we had to get court approval), fight with his Chapter 7 trustee over the conversion (the Chapter 7 trustee gets a commission on the sale of property, so he was upset that we were converting the case and keeping him from making a significant amount of money), and ultimately re-draft his entire bankruptcy petition and schedules to make sure that everything was in order.
Our client filed for Chapter 7 bankruptcy for the least amount of money possible - the filing fee. He spent his time and energy trying to learn as much as he could about bankruptcy. Ultimately, he ended up spending 3 times the amount needed to get out of debt and regain control over his life.
As I said at the beginning of this article, filing for bankruptcy case be inexpensive or extremely expensive. Hiring a skilled and experienced lawyer to represent you may seem like a costly proposition now, but it will save you a ton of money and difficulty later in the process.
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