How Much Will Filing for Bankruptcy Cost?

The purpose of filing for bankruptcy is to resolve debts, but the process of bankruptcy still costs a high price. This price is associated with paying for lawyers and legal fees to resolve the process. Costs will also be distributed to settle outstanding debts. Of course, the entire process will cost much less than paying the debts in full plus interest. Therefore, cost alone should not be a determinant in choosing to file for bankruptcy.

Court Fees

You will have to pay fees to the court in order to have a court-appointed trustee settle your estate. This individual, in most cases, is a low-ranking judge or public accountant working for the state. These fees are generally modest for most low-end bankruptcies. If you are settling a bankruptcy of a large business or very large estate, the process can take much longer and require more of an expert. Court fees will grow the longer the process takes. Going into court prepared to make all necessary settlements promptly can ultimately save you money.

Legal Bills

You do not have to hire a bankruptcy lawyer to assist you in the process. Many low-income individuals who are declaring bankruptcy allow court-appointed officials to care for the entire settlement. However, most people will be more comfortable having their own attorneys present to protect their interests. You will have to pay your attorney at his or her standard rate of billing throughout the bankruptcy suit. Again, if the bankruptcy is handled quickly, these bills can be manageable. Complicated bankruptcies, like those following divorces or bad business practices, tend to take much longer and be much more expensive. In this case, you can elect to minimize the amount of time your attorney spends on the case by requiring an attorney only when you appear in court.

Resolving Debt

The greatest cost associated with bankruptcy is the cost to dissolve your current debts. Contrary to what many think, debts are rarely simply "forgiven" or "discharged" in bankruptcy court. A portion of debts may be forgiven, but the principal sum on nearly all debts will be paid. This can occur in two ways: liquidation of assets or restructuring of payments. In both cases, you are actually required to transfer valuable assets from your pocket into the pocket of your lenders. If you cannot pay at the time you file, you may face wage garnishment and other measures. 

Shouldering the Cost

The court is well-aware people filing for bankruptcy are short on cash. The goal of the process, then, is not to completely eliminate a person's ability to live by requiring debts be paid immediately. Instead, plans and goals are set to allow people to continue living day-to-day while reducing their overall debt. You will be required to submit documents to the court showing your assets, income and expenses. The court will determine how much you can afford to pay each month based on these figures. If the burden is very high, the cost will be spread out over years of payments.

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