Cost of Filing Bankruptcy -
 


     Bankruptcy costs consist generally of: (a) bankruptcy court filing fees; and (b) attorney's fees, if an attorney is hired by the debtor. In Chapter 11 cases, Attorney's fees are generally negotiable between the client and the attorneythere are also quarterly US Trustee fees. Court filing fees are in the following range: Chapter 7: $ 299.00; Chapter 13: $ 274.00; Chapter 11: $ 1,039.00. For Chapters 9, 12, and 15, please consult your local bankruptcy court clerk for the schedule of fees.

Are Attorney Fees Negotiable?

     Attorney's fees are generally negotiable between the client and the attorney, and will vary on the location of the court, the complexity of the case, whether it is a business or consumer case, and the Chapter being filed. Often, the rules and guidelines of the local bankruptcy court will have a schedule of services which an attorney is required to perform in order to earn a particular fee. Generally speaking, attorney's fees tend to be higher in the larger metropolitan areas where the cost of living is higher.

 

Attorney's Fees Are Subject to Review by the Court

     All fees are subject to review by the bankruptcy court as to reasonableness. Attorneys who overcharge and gouge their clients face the very real prospect of having to "disgorge", or give the money back. These attorneys generally do not last very long in a particular area, once their modus operandi becomes apparent to debtors, the trustees, the courts, and others in the bankruptcy community. Word spreads fast in the lightning-quick Internet age, often to the chagrin of unscrupulous practitioners seeking to prey on the economically-downtrodden.

Chapter 7 Attorney's Fees

     In a Chapter 7 consumer case, attorney's fees can range between the "bargain basement" prices advertised by some attorneys, to wit, $ 300.00 to $ 1,000.00, to the middle ground somewhere between $ 1,000.00 to $ 2,200.00, and then up to $ 3,000.00 at the higher end. The fees in business Chapter 7 cases tend to be higher, as they are generally more complex. These fees generally start at about $ 2,500.00 and to up to $ 5,000.00 or more, again depending on the difficulty of the case and the issues presented.

Typical Chapter 7 Attorney-Client Agreements - Most attorney-client agreements contain a list of services which an attorney is required to perform, in exchange for payment of his "base" fee. This usually includes preparation of the petition, schedules of assets and liabilities, statement of financial affairs, and all other required court documents; filing all documents with the court; and representation of the debtor at the meeting of creditors. The agreement will also typically list those matters which are specifically excluded from the agreement. In those matters, the attorney will generally agree to represent the client, but at an additional fee. Such matters often include representation in: adversary proceedings, including complaints to determine dischargeability of debt and/or to deny the debtor's discharge; contested matters like motions to reaffirm debts and compel abandonment of property, and; criminal proceedings involving bankruptcy crimes.

Selection of a Chapter 7 Attorney - Clients will often wonder if they should shop around and then just go with the lowest-priced attorney. This often is a real conundrum. Debtors often are strapped for cash; that is why they are considering bankruptcy in the first place. There is a temptation to just find the cheapest lawyer around, and hope for the best. This can be a false economy, however, if the attorney is not experienced and cannot provide sound advice and direction. Competent and honest legal representation is available at a fair price. The best way to find it is through referral from trusted friends and/or advisers, and by doing due diligence before making the final selection of counsel. To find an attorney in your state or area, please go to Find An Attorney, elsewhere in this site.

Chapter 11 Attorney's Fees

     The Chapter 11 attorney wishes to obtain as large a pre-petition retainer as is possible, from which he can draw during the Chapter 11 while he performs his services. The majority of the Chapter 11 cases fail, so often an attorney will not be compensated for his services unless he was paid upfront. In many of the smaller Chapter 11 cases, which might be called "glorified Chapter 13s," the retainer might be somewhere in the neighborhood of $ 7500 to $ 20,000 or more. In the more complicated cases, retainers can be anywhere in the range from $ 25,000 up to $ 100,000 or more.

Chapter 13 Attorney's Fees

     These fees are going to vary from court to court, and state to state. In most courts, there is a "no look" base fee schedule. The fees will be awarded to the attorney, without the requirement of a fee application. The fees in a standard Chapter 13 case can range from about $ 2,000.00, up to $ 10,000.00, again depending on the complexity.

     The fees increase, for instance, if there are: real estate loans; unpaid taxes; domestic support obligations; repeat bankruptcy filing; additional real property; student loans; car loans; 25 or more creditors; and an operating business. If the attorney wishes additional compensation over and above the base fee, then he is permitted to file a fee application with the court.

     The court is permitted to award additional fees, if in the Court's opinion the additional work was necessary and performed in a reasonable manner. In some business Chapter 13 cases, fees can go up to $ 30-40k or more, especially if litigation is involved. The initial retainer is paid by the debtor. Thereafter, attorney's fees are paid through the Chapter 13 Trustee's Office, as a Chapter 13 administrative expense.

Relevant Articles

If You Cannot Afford an Attorney

     Some debtors cannot afford to hire an attorney. There are a number of nonprofit and pro bono services available for such persons. You should consult your local bar association for a list of these persons and agencies. Since filing a bankruptcy case is a civil, not criminal matter, no representation is available from the Office of the Federal Public Defender. If, however, a criminal proceeding for a bankruptcy crime is filed against a debtor, he or she may be eligible for such representation.

 

In Summary

     The cost of filing bankruptcy consists of the court filing fee and attorney's fees. Attorney's fees are negotiable between client and attorney. They will vary, depending on the location of the court, the Chapter being filed, and the complexity of the case.

     Selection of an attorney should be based not only on price, but on expertise and reputation in the community. Persons who cannot afford an attorney to help them file bankruptcy can seek help through legal aid clinics, pro bono service providers, and other nonprofit groups.

Written by Henry Rendler





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