- 2 min read
How Can I File Bankruptcy at Low or No Cost?
Bankruptcy on a Tight Budget
There are two out-of-pocket costs to bankruptcy:
- Lawyer’s fee
- Court filing fees
You can avoid lawyer’s fees two ways: File your own bankruptcy or find a lawyer whose time will not cost you anything.
You can avoid filing fees by asking the court for a fee waiver.
Avoiding Lawyer’s Fees
You can file your bankruptcy petition on your own, which will avoid any lawyer's fees. However, filing on your own a risky strategy.
Most self-created and filed bankruptcy petitions are not successful. Virtually all lawyer-produced bankruptcy petitions succeed. Why? Bankruptcy law is among the most technical specialty areas of law. It's easy to make a mistake with bankruptcy paperwork, which will cause the court to dismiss the case.
Bankruptcy lawyers are specialists. They learn bankruptcy law inside out. Bills.com recommends readers filing bankruptcy to do so with a lawyer's assistance to have the best chance of success.
If you can't afford a lawyer, then consult with a local organization that helps low- and no-income consumers find low- and no-cost legal services. See the Bills.com article Where to Find No-Cost Legal Aid if You Have Low or No Income. Help may be available, but you need to ask for it.
Struggling With Debts?
Unsure how to handle your debt? Use the Bills.com Debt Coach tool to receive a free analysis of all your debt resolution options. It’s free!
Avoiding Bankruptcy Court Fees
Bankruptcy courts provide options to people who cannot afford filing fees.
For example, if your income is below a certain amount, the court may waive your filing fee altogether.
Even if your income does not qualify you for a fee waiver, the court may allow you to pay your fee in installments rather than a lump sum. Discuss filing fee options with your lawyer.
Bills Action Plan
You may be able to file for bankruptcy at little or no cost. Take the following steps:
- Make sure you understand the difference between a Chapter 7 bankruptcy that discharges your debts and a Chapter 13 bankruptcy where the court will supervise a repayment plan.
- Look at all your bankruptcy alternatives, including credit counseling and debt settlement.
- Meet with a legal aid organization in your area, to see if you qualify for free attorney assistance.
- Research whether you are eligible to have the bankruptcy filing fees waived.
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q2 2022 was $16.15 trillion. Housing debt totaled $11.71 trillion and non-housing debt was $4.45 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1.739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Indiana, 17% have student loan debt. Of those holding student loan debt, 9% are in default. Auto/retail loan delinquency rate is 4%.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.