Beat the High Cost of Bankruptcy with this Free App
Debtor’s prisons may be a thing of the past but the high cost of bankruptcy still keeps many people chained to their debt.
In this video, we’ll look at how much bankruptcy costs and where you can save. I’ll show you the difference in costs for Chapter 7 and Chapter 13 bankruptcy and then reveal a way to save thousands when you file.
How to Afford Bankruptcy
Nation, we saw last week how bankruptcy was meant to be a fresh start and avoid those debtor’s prisons of the 1800s. The tragic fact is though, while that physical prison is gone, the high cost of bankruptcy keeps many from being able to afford this fresh start. Your body may be free but emotionally, psychologically…you’re still very much chained to that debt and pain.
That’s why I wanted to do this series of videos. In partnership with Upsolve, America’s largest bankruptcy non-profit, we’re looking at how bankruptcy can help free you from that debt and how to beat the high cost of filing.
The Upsolve app helps you file bankruptcy without a lawyer and has helped users clear over $206 million since 2016.
And unlike a lot of debt settlement or other bankruptcy services, Upsolve gets 80% of its funding from federal grants and philanthropic charities so it truly is there to help you save money.
In this video, we’ll look at the cost to file bankruptcy and how it keeps people from getting that fresh start they need. We’ll look at average costs for chapter 7 bankruptcy as well as filing chapter 13. Then we’ll look at how to save thousands off those costs filing bankruptcy without a lawyer.
If you’re not quite sure bankruptcy is your best option, make sure you check out that first video last week. In it we looked at how bankruptcy can help along with a few alternatives. We also looked at different situations where bankruptcy is your best option and how to decide.
How Much Does Filing Bankruptcy Cost?
The biggest hurdle though to getting that fresh start with bankruptcy is the cost, and it makes absolutely no sense that people trying to get out from under their debt are being asked to pay thousands for the process…but that’s the system.
There are really two costs when you go to file chapter 7 bankrutpcy; the filing fee you pay the court and attorney fees.
The filing fee is $335 and that’s nationwide. If your household income is below 150% of the poverty line for your household size, you might be able to get a waiver and not pay the fee. If you don’t qualify for the waiver, you can get an installment plan to pay the fee over four payments.
The poverty guidelines are important because besides determining whether you get a fee waiver, it’s also going to be used in a lot of other federal and state aid programs.
So here is the 2020 poverty guidelines for all states except Alaska and Hawaii…and I have no idea why they have separate guidelines. And the column you want to pay attention to here is the highlighted 150% column, so if you make less than this amount for your household size, you should be able to get that waiver on the filing fee for Chapter 7 bankrutcy.
Average Lawyer Fees to File Bankruptcy by State
Most attorney fees are going to be flat fee though some will still try to tack on an hourly rate. Make sure you get a list of everything that’s included in the flat fee like filing, forms and representation.
The total cost to file bankruptcy is going to depend on whether you have a home or other assets…and how expensive lawyers are in your state but the average for Chapter 7 bankruptcy is just over $1,300. The cost has gone up since 2005 when a new law made it more difficult to qualify for Chapter 7 and added more paperwork to the process.
A 2011 study by the American Bankruptcy Institute found attorney costs ranged from over $1,500 in Arizona to as low as $692 in Idaho with an average of $1,072, that was just the lawyer’s fee.
For chapter 13 bankruptcies, and remember from our first video, that’s when you make a payment plan on your debt so you don’t lose some of that property you own. The cost here jumps even higher.
Filing fees aren’t as bad with a fee of $310 but most people don’t get a waiver for the Chapter 13 fee. You can apply to pay the fee in installments though.
If we go back to that data on costs, the average cost to file Chapter 13 bankruptcy has also increased since 2005, to an average of nearly $2,900 to file with an attorney.
The ABI study found the highest attorney costs in Maine at almost $5,000 and in Nevada at just over $4,300 with the lowest in North Dakota at $1,560. The nationwide average for attorney fees on a Chapter 13 bankruptcy were $2,564.
Other Costs to File Bankruptcy
Anyone filing bankruptcy, either chapter 7 or 13, are also required to take two credit counseling courses. The first is a credit course before you file, that’s usually under $25, and the second is a debtor education course after filing that’s usually under $50, so not quite the roadblock as the other fees.
So you’re looking at between $1,500 to over $4,000 to file bankruptcy depending on where you live, which puts it out of reach for a lot of families…but that’s where Upsolve comes in.
How to File Bankruptcy for Free
The app was founded in 2016 and helps you file Chapter 7 bankruptcy without a lawyer, saving thousands in those fees.
Upsolve is a totally guided process online. You’ll start by answering a questionnaire about your personal finances and upload your pay stubs from the last 60 days and your last two years’ tax returns.
Upsolve will help you find an inexpensive credit counseling course and choose your filing date. Upsolve staff reviews your forms to make sure they’re complete and generates your forms to file with your nearest bankruptcy court.
The app makes it extremely easy and the only costs you’ll pay are the filing fee and for the two credit counseling courses. You pay nothing to Upsolve. The company is funded by government grants and donations along with fees that private attorneys pay Upsolve to provide free evaluations to visitors wanting individualized advice.
Now understand that Upsolve is only for simple Chapter 7 bankruptcy cases. This is going to be if you have minimal assets, so generally less than the median household income in your state and no mortgage. Click through the link in the description below to check though because it can save you thousands on filing bankruptcy.