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Why is it So Expensive to File a Bankruptcy?

Posted on May 8, 2012 in Bankruptcy, Bankruptcy Information, Bankruptcy procedures, BAPCPA, Chapter 13, Chapter 7, Illinois, Wisconsin

Lawyers, especially bankruptcy lawyers, are very aware of what is happening with the economy and how the average joe lives.  We are much more in tune with the middle and lower classes than our wealthier congressmen.  So when we hear questions like “Why are does it cost so much to file a bankruptcy?”, we understand and sympathize.  We even get that some people who would like to file cannot afford to do so.  This affects not only our clients in Wisconsin and Illinois, but consumers all across the country.

The price of filing a bankruptcy is set by Federal law. Right now, to file a Chapter 7 bankruptcy it costs $306, while a Chapter 13 bankruptcy runs $281. These fees go to pay the administrative fees of filing the case (things like the Trustee’s fees and the cost of processing paper work). While it is possible to petition the court to waive your fee for extreme financial difficulties, it is not easy to get a waiver.  It can’t be.  The courts depend on your payments in order to staff the courts, pay the judges, trustees, and other officials involved, and run everything smoothly.  The courts receive woefully little funding and rely on these fees to make the system work well.

The second part of the price to file a bankruptcy comes from attorney’s fees. Your attorney does a lot of work for you when filing your bankruptcy petition. Some of the tasks in a simple bankruptcy include: preparing the petition, contacting creditors that are garnishing or may garnish your wages, attending the 341 meeting, answering questions you have, protecting assets from seizure, and preparing a means test. The means test, which first showed up in 2005, is a big reason why the cost of filing a bankruptcy has shot up in recent years. As you can see in other posts, the means test helps determine whether or not you can file a Chapter 7 bankruptcy. Before the means test requirement, people could file so long as they were not filing in “bad faith.” Now, with the means test requirement, attorneys have to perform a tricky mathematical test which  measures whether or not our clients are deemed worthy of a Chapter 7 bankruptcy, based on income and expenses. What complicates the means test further is that there are now exceptions attorneys have to account for. To put it simply, the amount of work that goes into a bankruptcy is what makes the cost so high.

Even though there are high costs for filing a bankruptcy, we here at Lakelaw try and work with you to make bankruptcy affordable. If you have financial concerns but aren’t sure if bankruptcy is right for you, contact us for a free consultation in order to discuss your financial options. We promise to treat you with Care, Kindness, Courtesy, Respect, Professionalism and Dedication.

This article was co-authored by Lakelaw Senior Associate Ryan Blay and Associate Nicholas D. Strom

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