Bankruptcy Options and Information
There are many self-proclaimed "Financial Experts" out there telling people, "Bankruptcy bad. No, No." Frankly, as far as I'm concerned, they don't know what they’re talking about for most people in financial trouble. Maybe they've never been in real financial bad shape. Maybe they've never had collectors calling non-stop...calling them names...making threats.
Dealing with the embarrassment of collections, dealing with the stress of lawsuits, attorneys, etc., it's easy to sit on top of the mountain and tell other people to "quit whining and tighten your belt". Except that it’s crappy advice for a lot of people. You aren't ever going to dig back out and the creditors aren't going to let you anyway.
Maybe you were living paycheck to paycheck (like most people). Maybe, like everybody else in America, you bought more stuff on credit than you probably should have in hindsight. Well, they say hindsight’s 20/20 for a reason. The credit companies were right along the whole time practically throwing credit out of the back of trucks, weren't they?!? You were probably doing fine until something happened that was out of control (job loss, divorce, medical issue, etc.) and now, no matter what you try, things just seem to keep going downhill.
You aren't doing anyone (yourself, your family, Indiana or the IRS) any good by staying stuck in a never-ending financial quicksand. It will ruin your life. And, since no one knows how long they've got to live, someone stuffed-shirt, rich financial "expert" should take a leap before telling people they don't deserve to get help now!
The Bankruptcy Options
Most consumers are going to be looking at 2 choices in bankruptcy: Chapter 7 & Chapter 13.
Chapter 7 is the shorter of the two, lasting about 6 months from filing to Discharge (although, once you actually get filed, there is little more to do for most people). Chapter 7 is what most people are thinking of when they talk about a "fresh start". A fee for a Chapter 7 will range depending on how complicated the case happens to be and whether it is a single person filing or a married couple. Also, you should expect that all fees will have to be paid before filing. There are attorneys who have taken small amounts upfront, filed the case, and then expect you to pay the rest after filing, but BEWARE, this can raise issues between you and the lawyer. It puts you in a bad position if your attorney ends up trying to collect from you while they are supposed to be representing you! Or, just as bad, refuse to show up at your hearing later.
You can expect Chapter 7 attorney fees to range anywhere from $400 (extremely rare) to $1800+, and everywhere in between. Again, it will depend on how complicated your case is and whether you are a single person or married couple. If you are calling around to check fees, here are questions to ask to make sure you are getting the entire picture:
- Is the quoted fee all inclusive, or is the Filing Fee, etc. on top of that fee?
- How can an attorney quote a specific fee before seeing how much work is actually involved? If they have one flat rate for all cases, that means some people are overpaying.
- What other possible fees could there be? If they charge extra for certain motions and other work, what are these charges?
- Who is working on my case? Mostly an attorney, or is it mostly legal assistants and the attorney just reviews it before filing?
to read about
how to hire
Chapter 13 is more of a reorganization, although, to clear up a common misunderstanding, you do not have to pay everything back in a Chapter 13. Unsecured creditors (the kind that can't repossess anything, like medical debt and most credit cards) still usually only get a percentage of their claim paid, and that percentage is under 10 cents on the dollar in a lot of cases. Any part of the claim that is not paid is then discharged just like in a Chapter 7. A Chapter 13 case will last 3-5 years, and a specific payment is made to a trustee every month. The trustee then pays out to creditors based on the Chapter 13 Plan and Bankruptcy Law. Chapter 13 would usually be used by higher income households or in cases where something specific, like catching up a mortgage or dealing with taxes, is required. Chapter 13 fees are pretty uniform because the Court has set an approved fee. In the Indianapolis area, that fee is currently $3500. Some attorneys may claim to charge less, but, if they decide it was more work than they thought it was going to be later, they can still ask the Court for more money, so you should assume all Chapter 13's are $3500..
The biggest difference in Chapter 13 is going to be how much of the Attorney Fee has to be paid before filing. Unlike a Chapter 7, In a Chapter 13 it is normal to only pay part upfront and have the rest as part of your Chapter 13 Plan. How much has to be paid upfront will typically range anywhere from $0 to $1000, however, in a case where there is some kind of emergency (such as a Sheriff's Sale scheduled very soon on a house you want to keep), you could be required to pay the entire fee upfront. So, delaying can be expensive!
Bankruptcy can seem expensive, but, compared to what attorneys charge in other areas of law and how much debt you will not have to pay, it really is very inexpensive. There are many ways an attorney can help you figure out how to pay for your filing also, so, you should at least see what your options are before making a decision that it is too expensive for you.
Depending on what your situation is, the Chapter you file can make a big difference in effectiveness. Even though every bankruptcy case may be different, they all share the same goal: to come out the other end in better financial shape. Hiring a good Bankruptcy Attorney can be your first step toward reaching that goal.