Do I Qualify for Bankruptcy?
Qualification for bankruptcy depends on the specific chapter of bankruptcy. To qualify for a Chapter 7 bankruptcy, your income must be below median income, or you must pass the “means test” to determine if you are eligible. The means test looks at whether you can afford to pay back some of your debts if you were to budget differently and file a Chapter 13 repayment plan. You do not have to do the means test if your debt is mostly from operating a business, if you are a disabled veteran and your debts were incurred while you were on active duty, or if you are a guardsman/reservist and your debts were incurred while on active duty.
To qualify for a Chapter 13, you must be a person or a married couple. Businesses do not qualify, but people who own businesses do. There is a secured debt limit of $1,184,200 and an unsecured debt limit of $394,725. In order to qualify for a Chapter 12, you must derive most of your income from farming or fishing operations, and most of your debts have to be related to farming or fishing. If you live on the farm, your mortgage will likely qualify as a farming debt. Your total debts cannot exceed $4,153,150. Chapter 11 can be filed by anyone, although it is the most expensive and most complex chapter of bankruptcy. There is a simpler version of Chapter 11 called Subchapter 5, with a debt limit of $2,725,625; however, Congress temporarily increased the limit to $7,500,000 until March 27, 2021, due to COVID-19 and the economic shut down on businesses.
During your free consultation, our attorneys will review the different chapters of bankruptcy available to you and what may work best for your situation.
Many financial advice gurus say that you should only consider bankruptcy to be a “last resort.” While bankruptcy should not be your first instinct, it is dangerous to think of it as your last resort. Delaying a needed bankruptcy can damage you financially, mentally, and emotionally. It can cause you to lose your retirement, your home, and your income while adding unnecessary stress. Your retirement account and your equity in your home are likely protected from your creditors. If you find yourself considering borrowing from your retirement or taking out a second mortgage to pay hospital bills, credit cards, or other debts, please seek advice from a legal professional first. A bankruptcy can resolve these debts without jeopardizing your savings and your future.
If you are facing a crisis like foreclosure, garnishment, repossession, levy, or lawsuit, you do not want to wait to seek legal advice. Filing a bankruptcy can stop these actions and save your wages, car, or home from being taken from you. You may also want to consider filing bankruptcy even if you are not in an immediate threat if you can tell that your income is not enough to pay off your bills. Credit cards and loans accrue interest each month. If you are just paying the minimum balance, it may take years for you to dig your way out of debt. This can keep you from saving for retirement or covering important expenses for your family or your health. A bankruptcy can help you climb out of this hole and plan for your future.
How Much Does It Cost to File Bankruptcy?
Even though our consultations are free, it does cost money to file bankruptcy. These costs include attorneys’ fees, court costs and the costs of legally required credit counselling. Since Congress amended the bankruptcy code in 2005, it has become more difficult to file bankruptcy and very dangerous to file without the help of a lawyer. If you do not have an attorney, you may risk having your case dismissed, losing property that should be protected, or even facing jail time for bankruptcy fraud. Every bankruptcy case is different, and our pricing reflects that. We offer free consultations via telephone, skype, zoom, or in-person to analyze your case and provide you with the best quote available.
Our fees for Chapter 7 are based on how difficult the case is. They typically range between $1,000 and $3,000, although exceptions can be made under certain circumstances. We cannot provide a quote until we have looked at the facts of your case, including your income, your assets, prior bankruptcy filings, and any details that may complicate your case. We charge one flat fee to file the case and will not charge anything extra once the case is filed. We work with people on payment plans that work for them, but bankruptcy law requires that all attorneys’ fees be paid before the filing of a Chapter 7 case. The filing fee for Chapter 7 is currently $335.
The fees for Chapter 13 cases are set by the bankruptcy court. Currently, the attorneys’ fees are set at $3,600, and the filing fee is $310. Most of the attorneys’ fees are paid through the bankruptcy plan, however. This means that it may cost less up front to file a Chapter 13 than it would to file a Chapter 7. This may be useful for people who cannot afford the full filing fee of a Chapter 7 but need to seek bankruptcy relief immediately. The amount charged up front for a Chapter 13 also varies depending on the case. In most circumstances, we can file the case for $500 plus the filing fee, with the remainder paid over the bankruptcy plan (three to five years). If a mortgage is involved or if there is a significant amount of work required before filing, we may ask for a bigger down payment before a case is filed. Like with a Chapter 7, we may be able to make an exception downward in certain circumstances.
Chapters 11 and 12 are very complex, and attorneys’ fees are billed at an hourly rate depending on the attorneys involved. Because these cases vary greatly, we cannot provide an estimate of the retainer until you have met with a lawyer. Our consultations are free, so there is no harm in meeting with a lawyer to determine your options.