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How Much Does It Cost to File Bankruptcy?

Before moving ahead with a major financial decision like a bankruptcy filing, consumers understandably want to know how much it will cost.  Unfortunately, there is no easy answer.

Here’s a bit of advice: If you’re looking for someone to hire, run away from any attorney who quotes a fee for a bankruptcy without first learning the specifics of your situation. Without knowing how complicated your case may be or which Chapter of the Bankruptcy Code can best suit your individual needs, the attorney simply cannot

make a reasonable estimate regarding the legal fees. There is no such thing as a routine or simple bankruptcy case. Every case is different and they each have their own challenges

The attorney that quotes a fee without knowing anything about the potential case either (1) overcharges some clients by quoting the amount he would charge for the most complicated case, or (2) doesn’t know enough about bankruptcy to understand the possible complications that can arise. Either way, he isn’t the attorney you want to hire.

Think of it this way: if I call my mechanic and ask how much it will cost to fix my car, is he going to quote a price without knowing what’s wrong with the car? Of course not. If he did, I’d look for another mechanic immediately. The competent mechanic is going to get some information about the car before quoting a price to fix it, either by looking at the car or asking questions over the phone.

By the same token, the competent attorney needs information about your finances before quoting a fee for fixing any problems. If you’re intent on getting a firm fee quote for a bankruptcy over the phone, here are some questions you’ll need to answer:
How do you know that bankruptcy is your best debt-relief option?

  • How do you know that Chapter 7 is better for your situation than Chapter 13?
  • Do you have any nondischargeable debts?
  • Do you have any assets with values above the available exemption limits?
  • Which exemption scheme will you be using?
  • Is your annualized current monthly income above or below the median in your state for your household size?
  • Will the presumption of abuse arise in your case? If so, will you be able to rebut it?
  • Would a lien strip be possible or helpful in your situation?

>As you can see, there are many variables involved in setting legal fees for a bankruptcy. And very few attorneys are going to take the time to gather all of this information over the phone.

The best way to find out how much your case will cost is to talk to a lawyer.  Many will give you a range of fees over the phone. For example, I tell prospective clients that budgeting anywhere from $1500 to $2250 for a Chapter 7 will likely be in the ballpark, but that their specific case may cost more or less. I can quote a fee after we’ve had a meeting and I’ve had a chance to learn about the client’s financial situation. Many lawyers also offer free initial consultations. Others charge a nominal amount for a brief meeting and an assessment of the case.  Regardless of individual policies regarding consults, no attorney will file your case without having you sign a fee agreement. Therefore, you’ll know exactly how much your case will cost before you commit to anything.

This guest post was written by Bret Nason, a consumer bankruptcy attorney in Wisconsin.

Do I Need to List All of My Creditors in my Bankruptcy Petition?

Guest Post by Michigan Bankruptcy Attorney John Hilla

In either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, it is crucial to list all of your creditors as completely as you are able. While it may be an intimidating task to gather the information necessary to do this, it will be well worth your while to do a thorough job of assisting your bankruptcy attorney in gathering the information prior to filing.

In either Chapter of bankruptcy, the primary reason for this is obvious: you want all of your creditors to be noticed of the bankruptcy filing so that they can quickly cease and desist all collections efforts—including lawsuits, garnishments, foreclosures, negative credit reporting, and perfection of liens—as required by the US Bankruptcy Code.

However, there are some further reasons particular to each Chapter of bankruptcy to keep in mind as well.

In a Chapter 7 bankruptcy, on one hand, it is fairly well-settled law at this point that, in a “no-asset” Chapter 7 case, all unsecured debts are discharged regardless of whether they have been explicitly listed in the bankruptcy petition schedules or not. A “no-asset” Chapter 7 is a Chapter 7 bankruptcy in which the Chapter 7 Trustee, who is the individual responsible for liquidating for the benefit of creditors a filing debtor’s assets where they are not fully protected by available bankruptcy exemptions, is not able to liquidate any assets. In other words, a Chapter 7 bankruptcy in which all of the filing individual’s stuff is fully exempted, or protected, from liquidation.

This is the vast majority of Chapter 7 bankruptcies. However, from the outset, it is not always possible to know for certain whether the case will be a “no-asset” case or not. An experienced bankruptcy attorney usually has a pretty good idea of whether that is the case or not, but there is always the possibility that a client will remember an asset that they forgot to reveal to their attorney before filing that cannot be fully exempted, that the Trustee will recover funds from the sale of surrendered real estate in the Chapter 7, that a pending lawsuit will settle resulting in an award, or that some other factual circumstance will occur bringing a non-exempt asset into the picture that perhaps was not seemingly there prior to filing. Suddenly, if something along those lines were to occur, the “no-asset” case becomes an “asset” case—and unlisted unsecured debts are not discharged after all.

Additionally, the unlisted debt must, as noted, be an unsecured debt. That is, a debt that is not “secured” by collateral of some sort, as a home mortgage loan or automobile loan is. Credit card debt and medical debts are unsecured debts, for example. Typically, however, if a debt has not been listed in a bankruptcy petition, it is because the filing debtor has forgotten it or neglected to provide the information to his or her bankruptcy lawyer for one reason or another. Under that sort of happenstance, the debt, if it turned out to be secured rather than unsecured, could just as likely end up not being discharged and rendering the bankruptcy a far less effective debt solution for the consumer than it might otherwise have been. Additionally, occasionally, a debt one might consider unsecured, such as a department store credit card debt, might be argued by a creditor to actually be secured by the goods purchased with it. This is a common argument by HSBC ‘s attorneys on behalf of Best Buy regarding goods purchased with Best Buy credit cards, for example. While it is an argument easily refuted by an experienced bankruptcy attorney, that becomes a much more difficult case to make if the debt was not listed and the creditor not given proper notice of the bankruptcy filing and an opportunity to challenge the unsecured classification before the Bankruptcy Court.

In a Chapter 13 bankruptcy, the reason for listing every debt is much more straightforward: an unlisted debt is not discharged in a Chapter 13. Period.

In all cases, the Bankruptcy Code requires that all debts be listed, regardless of whether they are dischargeable or not dischargeable. At a number of different junctures in both the Chapter 7 bankruptcy and the Chapter 13 bankruptcy process, you will swear under penalty of perjury that you have listed all of your assets and all of your liabilities (debts). In short, they need to be listed, so it is vital that you cooperate with your bankruptcy attorney to gather the information necessary to list all of your creditors prior to filing the bankruptcy.

As with any articles online discussing legal issues of debt relief, you should always check with a local bankruptcy lawyer

Can you discharge liens by condo associates?

United States Bankruptcy Court RulesMany Debtors who have sought debt relief through filing a personal bankruptcy have found that although they can discharge most of their debts and even strip judicial liens in a Chapter 7 case, there is one pesky little lien that follows them even after bankruptcy and gives rise to Creditors filing Motions to lift the automatic stay.  That type of lien is a condo association lien for HOA fees not paid.

These types of liens arise due to a homeowner failing to make his or her payments for shared housing expenses to a condominium associates or home owners Association.  In some cases, the condo board will file a motion to lift the automatic stay in a bankruptcy proceeding because even though the liability against the person will be discharged, a statutory lien is created for failure to make payments and the condo association will seek to foreclose on the property.  This is really quite unfortunate, as these debts can be under $2,000, less then one month’s mortgage, but the lien gives some rights.

Homeowners and Debtors have historically had some difficulty with this under Title XI.  The best advice to give homeowners in the past was either to negotiate a deal with the condo board and then file a stipulation and consent order with the Bankruptcy Court, or to file a Chapter 13 case after the initial Chapter 7 discharge and simply pay back the condo fee arrears over 3 – 5 years based upon the Debtors Disposable income.

This all seems a little unfair, if  you consider that any other unsecured creditor who sues a Debtor, gets a judgment in court and even places a lien upon the Debtor’s real estate, can strip that lien so long as it impairs a valid bankruptcy exemption under 11 U.S.C. § 522(f).

There appears to be some good news coming out the bankruptcy court though.  In a case inPennsylvania, Young v. 1200 Buena Vista Condominiums, 467 B.R. 792 (2012), where a lien due to missed condo fees may be partially stripped.  The court discusses how the Bankruptcy Code identifies and recognizes three types of liens: judicial liens, security interests, and statutory liens. A judicial lien is defined as a “lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding.” 11 U.S.C. § 101(36). A “security interest” is defined as a “lien created by an agreement.” 11 U.S.C. § 101(51). Finally, the Bankruptcy Code defines a “statutory lien” as a lien that arises “solely by force of a statute on specified circumstances or conditions….” 11 U.S.C. § 101(53).

The court in Young has held that the Bankruptcy Code narrowly defines a “statutory lien” as specifically excluding liens that may also be identified as a “security interest” or “judicial lien.” are mutually exclusive and that the type of the lien is predetermined upon genesis of the lien instead of subsequent action taken toward its enforcement.  Based upon the foregoing, a lien formed by statute but giving rise to a security interest upon the assessment of fees remains a statutory lien, just as a lien created by an agreement including the grant of a security interest remains a security interest even though judicial action may be undertaken to enforce it.