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06-29-2006, 08:39 AM
9 bankruptcy costs you should know about By Brigitte Yuille • Bankrate.com
Talk about piling insult onto injury: The cost of declaring bankruptcy has increased.
Most debtors expect to pay filing fees, and many know that they probably will be better off if they have a lawyer to help resolve their debt problems, despite the cost.
But some additional fees aren't as obvious or as well-known and could become a major problem, inflating your list of overdue obligations.
Adding to the costs, lawmakers agreed last year to increase the bankruptcy court filing fees as part of the Deficit Reduction Act. The fee changes went into effect in April and cover the bankruptcy petition conversion of a Chapter 7 or Chapter 13 bankruptcy to a Chapter 11, which is used for business bankruptcies and some miscellaneous expenses.
Debtors making changes to their bankruptcy cases and/or proposals for additional actions also will pay more. Plus, they will have to avoid some mishaps such as bad checks and searches for missing records if they don't want to add to their debt.
1. An attorney
Attorney fees vary from state to state. Brad Botes, consumer bankruptcy attorney in Birmingham, Ala., and former executive director of the National Association of Consumer Bankruptcy Attorneys, found that most practitioners around the country charge as little as $600 to $700 for a Chapter 7 bankruptcy, up to as much as $3,500.
For Chapter 13 bankruptcies, many courts set a fee limit based on local rule or general order, according to Jane Limprecht, spokeswoman for the Executive Office of the U.S. Trustees, which oversees administration of bankruptcy cases.
"This is not a maximum or minimum fee," Limprecht says. "It is an amount below which an attorney may apply to the court for fee approval in a simplified fashion, usually without a detailed listing of hours expended. The fee limit and other details vary from court to court."
Botes says costs for Chapter 13 cases have ranged from as low as $1,500 to as high as $3,500.
2. Credit counseling
Consumer credit counseling, mandatory under the new law, usually costs $50 each for the pre-filing credit counseling and the pre-discharge financial education course, although the services must be provided regardless of the debtor's ability to pay. The service is offered over the phone, in person and on the Internet.
3. The bankruptcy petition
Debtors seeking to attain relief from their debts have to file a bankruptcy petition. That's going to cost.
The amount for a Chapter 7 bankruptcy is $299. This includes the statutory filing fee of $245, a $39 administrative fee and the $15 case trustee fee.
The amount for filing a Chapter 13 is $274. This includes the statutory filing fee, which is $235, and the $39 administrative fee.
"The fees are broken down, because they must be allocated among the U.S. Treasury, the U.S. Trustee System and the judiciary," says Tony Anastas, chief deputy clerk for the U. S. District Court, District of Idaho.
The Chapter 7 trustee fee is used to pay the trustee, who doesn't receive a salary. Chapter 13 trustees are compensated by a percentage of funds they administer under the terms in the repayment plan. Experts say this is usually about 10 percent.
"There is a statutory maximum the Chapter 13 trustee cannot exceed in each case," says Larry Greer, administrative services manager, U.S. Bankruptcy Court for the Northern District of Indiana.
"The actual percentage is set by the U.S. trustee for the region where the trustee serves and can vary from region to region and trusteeship to trusteeship."
The administrative fee of $39 covers the costs that courts incur for overseeing the case.
4. Amendments to the case
Amendments are the most common change and can set a debtor back $26. They typically arise as last-minute entries, such as adding a creditor.
5. Reopening a bankruptcy case
Reopening a case for a Chapter 7 bankruptcy costs $220; $150 for a Chapter 13.
Bankruptcy experts say cases are usually reopened when a debtor forgets to include a creditor or the debt was assigned to a different creditor and the debtor didn't know.
6. Conversion from a Chapter 13 to Chapter 7
Conversion from a Chapter 13 to a Chapter 7 bankruptcy costs $15.
Experts say most debtors change from a Chapter 13 to Chapter 7 because they did not have the money to meet the payment plan.
Petitioners do get one break: Conversions from a Chapter 7 bankruptcy to a Chapter 13 do not require a fee.
Henry Sommer, executive director of the National Association of Consumer Bankruptcy Attorneys, says one reason for this type of conversion is the debtor is facing a challenge or has lost a challenge under the means test.
The means test is a calculation that determines whether a person is eligible to erase his or her debt or whether the person has the "means" to pay their debt off. Courts analyze the average income six months prior to filing and compare that amount to the median income for the state.
Sommers says another reason is the trustee successfully argued that some of the debtor's property could be taken away in the bankruptcy.
7. Splitting a case
Splitting a case or the "division of a joint case" can cost Chapter 7 filers $220 and Chapter 13 filers $150. This typically occurs between married couples.
"The statue permits a married couple to file a joint case," says Greer. "From time to time a situation comes up where, for example, a member of the couple determines they may not need to be a part of the bankruptcy case, so the cases are split."
8. Compelling abandonment of property
A debtor may compel abandonment of property, but it will cost $150.
Sommers says this can occur when "the court finds the property is not worth selling to the benefit of creditors and therefore the trustee should give up any right to do anything with it."
Most experts say it doesn't occur that often, but Sommers describes one situation where a debtor may decide to take action.
"For example, in areas where real estate is going up, occasionally trustees drag out the case to say the property is worth more and they should sell it and the debtor doesn't want that to happen," says Sommers.
9. Withdrawing the reference
Another action that some experts describe as rare is to withdraw the reference. This also costs $150.
"The district court has jurisdiction of all bankruptcy cases," says Diane S. Robl, Esq., clerk of United States Bankruptcy Court, Western District of Kentucky. "They have referred those cases to a bankruptcy court.
"In cases that involve issues that are not addressed in bankruptcy, the parties -- either debtor or creditor -- may request the district court to withdraw the reference to the bankruptcy court so the district court can hear all matters, even those not addressed in bankruptcy."
Bankrate.com's corrections policy -- Posted: June 29, 2006
Talk about piling insult onto injury: The cost of declaring bankruptcy has increased.
Most debtors expect to pay filing fees, and many know that they probably will be better off if they have a lawyer to help resolve their debt problems, despite the cost.
But some additional fees aren't as obvious or as well-known and could become a major problem, inflating your list of overdue obligations.
Adding to the costs, lawmakers agreed last year to increase the bankruptcy court filing fees as part of the Deficit Reduction Act. The fee changes went into effect in April and cover the bankruptcy petition conversion of a Chapter 7 or Chapter 13 bankruptcy to a Chapter 11, which is used for business bankruptcies and some miscellaneous expenses.
Debtors making changes to their bankruptcy cases and/or proposals for additional actions also will pay more. Plus, they will have to avoid some mishaps such as bad checks and searches for missing records if they don't want to add to their debt.
1. An attorney
Attorney fees vary from state to state. Brad Botes, consumer bankruptcy attorney in Birmingham, Ala., and former executive director of the National Association of Consumer Bankruptcy Attorneys, found that most practitioners around the country charge as little as $600 to $700 for a Chapter 7 bankruptcy, up to as much as $3,500.
For Chapter 13 bankruptcies, many courts set a fee limit based on local rule or general order, according to Jane Limprecht, spokeswoman for the Executive Office of the U.S. Trustees, which oversees administration of bankruptcy cases.
"This is not a maximum or minimum fee," Limprecht says. "It is an amount below which an attorney may apply to the court for fee approval in a simplified fashion, usually without a detailed listing of hours expended. The fee limit and other details vary from court to court."
Botes says costs for Chapter 13 cases have ranged from as low as $1,500 to as high as $3,500.
2. Credit counseling
Consumer credit counseling, mandatory under the new law, usually costs $50 each for the pre-filing credit counseling and the pre-discharge financial education course, although the services must be provided regardless of the debtor's ability to pay. The service is offered over the phone, in person and on the Internet.
3. The bankruptcy petition
Debtors seeking to attain relief from their debts have to file a bankruptcy petition. That's going to cost.
The amount for a Chapter 7 bankruptcy is $299. This includes the statutory filing fee of $245, a $39 administrative fee and the $15 case trustee fee.
The amount for filing a Chapter 13 is $274. This includes the statutory filing fee, which is $235, and the $39 administrative fee.
"The fees are broken down, because they must be allocated among the U.S. Treasury, the U.S. Trustee System and the judiciary," says Tony Anastas, chief deputy clerk for the U. S. District Court, District of Idaho.
The Chapter 7 trustee fee is used to pay the trustee, who doesn't receive a salary. Chapter 13 trustees are compensated by a percentage of funds they administer under the terms in the repayment plan. Experts say this is usually about 10 percent.
"There is a statutory maximum the Chapter 13 trustee cannot exceed in each case," says Larry Greer, administrative services manager, U.S. Bankruptcy Court for the Northern District of Indiana.
"The actual percentage is set by the U.S. trustee for the region where the trustee serves and can vary from region to region and trusteeship to trusteeship."
The administrative fee of $39 covers the costs that courts incur for overseeing the case.
4. Amendments to the case
Amendments are the most common change and can set a debtor back $26. They typically arise as last-minute entries, such as adding a creditor.
5. Reopening a bankruptcy case
Reopening a case for a Chapter 7 bankruptcy costs $220; $150 for a Chapter 13.
Bankruptcy experts say cases are usually reopened when a debtor forgets to include a creditor or the debt was assigned to a different creditor and the debtor didn't know.
6. Conversion from a Chapter 13 to Chapter 7
Conversion from a Chapter 13 to a Chapter 7 bankruptcy costs $15.
Experts say most debtors change from a Chapter 13 to Chapter 7 because they did not have the money to meet the payment plan.
Petitioners do get one break: Conversions from a Chapter 7 bankruptcy to a Chapter 13 do not require a fee.
Henry Sommer, executive director of the National Association of Consumer Bankruptcy Attorneys, says one reason for this type of conversion is the debtor is facing a challenge or has lost a challenge under the means test.
The means test is a calculation that determines whether a person is eligible to erase his or her debt or whether the person has the "means" to pay their debt off. Courts analyze the average income six months prior to filing and compare that amount to the median income for the state.
Sommers says another reason is the trustee successfully argued that some of the debtor's property could be taken away in the bankruptcy.
7. Splitting a case
Splitting a case or the "division of a joint case" can cost Chapter 7 filers $220 and Chapter 13 filers $150. This typically occurs between married couples.
"The statue permits a married couple to file a joint case," says Greer. "From time to time a situation comes up where, for example, a member of the couple determines they may not need to be a part of the bankruptcy case, so the cases are split."
8. Compelling abandonment of property
A debtor may compel abandonment of property, but it will cost $150.
Sommers says this can occur when "the court finds the property is not worth selling to the benefit of creditors and therefore the trustee should give up any right to do anything with it."
Most experts say it doesn't occur that often, but Sommers describes one situation where a debtor may decide to take action.
"For example, in areas where real estate is going up, occasionally trustees drag out the case to say the property is worth more and they should sell it and the debtor doesn't want that to happen," says Sommers.
9. Withdrawing the reference
Another action that some experts describe as rare is to withdraw the reference. This also costs $150.
"The district court has jurisdiction of all bankruptcy cases," says Diane S. Robl, Esq., clerk of United States Bankruptcy Court, Western District of Kentucky. "They have referred those cases to a bankruptcy court.
"In cases that involve issues that are not addressed in bankruptcy, the parties -- either debtor or creditor -- may request the district court to withdraw the reference to the bankruptcy court so the district court can hear all matters, even those not addressed in bankruptcy."
Bankrate.com's corrections policy -- Posted: June 29, 2006