It may seem counterintuitive to a prospective bankruptcy debtor facing financial straits and a fiscally desperate situation that filing for bankruptcy protection comes with a price tag. But, it does. And that price tag is not small. And the process can be complicated, taxing, and stressful. As such, many feel that having an experienced party to help them navigate unfamiliar territory is worth the price.

What does it cost to file bankruptcy?

The first cost associated with filing bankruptcy is a filing fee. For Chapter 7 consumer bankruptcy cases (liquidations), the filing fee is standardized. That fee is approximately $300. The fee for a Chapter 13 case (reorganization) is slightly less, at approximately $275. Payment of that fee must be made upfront by the client, the prospective debtor, before the case can begin.

Besides the filing fee, are there other costs?

On top of filing fees, there are costs associated with retaining legal counsel to help file the case and navigate the bankruptcy system. On average, attorneys’ fees for consumer bankruptcy run between $1,000 and $2,000. That fee is for work that spans three to five months, usually, for the lifespan of a Chapter 7 bankruptcy case. The initial consultation is not included in that fee because most counsel offer free initial consultations with prospective debtor clients. Most lawyers allow clients to pay legal fees in several installment payments over the lifespan of the bankruptcy case. If counsel is not willing to allow a prospective debtor to pay attorneys’ fees in installments, that might be a signal to keep looking further for alternative counsel candidates.

Further, it may not be the best policy to hire the cheapest bankruptcy counsel in town. A more prudent strategy is to meet with three or four prospective attorney candidates and after having the in-person initial consultation, make a selection based on the exchange, comfort level, overall feeling, competency, price, and other key decision-making factors.

How can a client save legal fees?

The best way for a bankruptcy debtor to minimize the legal fees he or she has to pay is to be organized, timely, and prepared. A debtor should keep documentation and paperwork organized. He or she should timely attend all meetings with counsel, counsel’s staff, the trustee, court, and otherwise. He or she should be prepared for all meetings and appearances by timely submitting complete, accurate, and thorough paperwork and whatever information is requested.

Other ways to cut costs and save?

Another way to gain control in the legal process and attempt to save money on legal fees is to negotiate with bankruptcy counsel not to attend the initial meeting of creditors. If a debtor is willing to attend that meeting without counsel, the time required for waiting for the debtor’s case to be called, the examination period, and any follow-up conversations with creditors, the examining trustee, and client would not be billed. Counsel may not be willing to negotiate on this point; it depends on the lawyer. It also depends on the jurisdiction. In some states, counsel is required to attend the initial meeting of creditors (Section 341 meeting), regardless of preferences of the attorney and client. Massachusetts is an example of such a state.