The Average Cost of a Chapter 13 Bankruptcy

What Is a Chapter 13 Bankruptcy?

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  Chapter 13 bankruptcies are also referred to as reorganization bankruptcies. A debtor who files under Chapter 13 of the United States Bankruptcy Code proposes a payment plan along with the bankruptcy petition. Those who do not meet the requirements of the means test to file for Chapter 7 bankruptcy must file instead for Chapter 13. The means test compares the debtor's average income for the past six months to the state median income. If the debtor's average income exceeds that state's median income level, the debtor will be required to file for Chapter 13 bankruptcy.
  
  

Chapter 13 Filing Fee

• The actual cost for filing a Chapter 13 bankruptcy petition isn't that high. The current Chapter 13 filing fee is approximately $274. That amount covers various filing and administrative fees incurred by the bankruptcy court during Chapter 13 proceedings. Individuals who file for Chapter 13 bankruptcy are those who have enough income coming in to meet the terms of their repayment plan, which is typically spaced out for a three-to-five-year time period. Fortunately, the attorney fees associated with Chapter 13 bankruptcy cases can typically be rolled into that payment plan.
  
  

Chapter 13 Attorney Fees

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  The attorney fees associated with filing for Chapter 13 bankruptcy vary depending upon the attorney's hourly rate. Attorneys typically charge an upfront fee called a retainer to begin working on a case. That retainer can vary from $500 to $1,000 or even higher. Most bankruptcy attorneys will quote a figure somewhere around $2,000 to $3,000 as an average total cost for filing a Chapter 13 bankruptcy case. That total fee, minus the retainer fee, will be paid out to the attorney by the bankruptcy court as part of your regular monthly Chapter 13 payment plan.
  
  

Chapter 13 Payment Plan

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  Debtors who file for Chapter 13 bankruptcy must typically make the first payment on the plan within 30 days of filing the plan and then each month afterward. Payments under this chapter of the Bankruptcy Code start even before the Meeting of the Creditors (sometimes called the 341 Meeting of Creditors). The payments continue even when any objections are ongoing. Payments must be made via certified funds like money orders, cashiers checks or voluntary wage deductions. If the debtor stops making payments without prior court approval, the trustee will ask that the case be dismissed.
  
  

Chapter 13 Bankruptcy Discharge

• Under Chapter 13 bankruptcy, a "discharge" refers to the legal forgiveness of debts. Once the repayment plan has been completed, the debts will be discharged. The court will enter the bankruptcy discharge, and then all creditors who received proper notice of the bankruptcy can try to collect debts from you personally except those debts that were deemed non-dischargeable, such as most student loans and child support obligations. The discharge will remain on your credit report for approximately ten years after the case was filed.