This article is for informational purposes only and should not be construed as legal or financial advice. If you need legal advice, you can contact a bankruptcy attorney.
Many people avoid bankruptcy because they believe they can't afford it.
As someone dealing with inflation, I find it can be difficult to afford anything these days.
Take John, for example, who recently
filed for bankruptcy. He wondered how he could afford the process when he was already struggling with debt.
We are going to cover a little about Chapter 7 bankruptcy than the options from cheapest to most expensive.
1) Understand Chapter 7 Bankruptcy (often cheapest and fastest bankruptcy type)
2) File Chapter 7 bankruptcy without an attorney and get filing fee waived
3) File Chapter 7 bankruptcy without an attorney and pay filing fee
4) File Chapter 7 bankruptcy with an affordable attorney
5) Borrowing money from family or friends to file Chapter 7 bankruptcy
Understanding Chapter 7 Bankruptcy
Chapter 7 bankruptcy can eliminate most of your unsecured debts, such as credit card balances and medical bills.
It’s often called a "fresh start" because it wipes out these debts, allowing you to rebuild your financial life.
This type of bankruptcy involves liquidating your non-exempt assets to pay creditors, but many people retain their essential belongings through exemptions.
1. File without an attorney and get filing fee waived
There are two components, so we will address both separately.
a) Filing Without An Attorney
When you file without an attorney, you may want additional assistance as the bankruptcy forms can be complex.
For example, your total bankruptcy filing package could utilize over 20 different forms. I saw package the other day that was over 90 pages long when submitted to the court.
In addition, the forms certainly do not feel user friendly. Check out just a small portion for
Schedule E/F: Creditors Who Have Unsecured Claims below. This bankruptcy form is just 6 pages, but it feels like they crammed 20 pages of material on those 6 pages.
Utilizing online resource can help simplify your experience and make your life easier.
i) Use Online Resources
You don’t have to hire an attorney to file for Chapter 7. Numerous online resources can guide you through the process.
The product assists with the entire process by providing the necessary forms to fill out, completing the means test, providing option for your courses, saves the data, provides where to take to the court, and a bankruptcy filing checklist with any required local forms. Please note that the software isn't for everyone, so you do have to take a
short questionnaire to see if you are able to get started for free. Here's a screenshot of the product.
Local bankruptcy courts often have helpful information online too. If you choose to file without an attorney, be very careful.
You may not be able to dismiss your case voluntarily, and the Chapter 7 trustee could sell your property to repay creditors.
If you do not use bankruptcy software, make sure you use the latest forms and guidelines from official sources, as bankruptcy laws and forms can change frequently.
ii) Seeking Free Legal Aid
I put this as secondary to using online resources as it may be very challenging to find free legal aid and pro bono programs.
Why?
Because many people that are filing bankruptcy that hire an attorney have no money, so many people want free help, but there's only a certain amount availabe.
The last thing you may want to do is look for 5-10 hours for free help, and not get any free help.
That said, depending on your income, you might qualify for free legal aid.
Many states offer Pro Bono programs through the Bar Association or have local legal aid offices.
These services may provide assistance to help with your bankruptcy case. Contact local legal aid organizations to see if you qualify.
b) Requesting Fee Waivers
Waiver of the Filing Fee
If you have low income, you may qualify for a waiver of the Chapter 7 filing fee.
Submit Bankruptcy Official Form B 3A with your petition to apply.
This can significantly reduce your initial costs.
Check the eligibility criteria and gather all necessary documents to support your application.
Waiver of Bankruptcy Course Fees
You might also qualify to waive the fees for the required Credit Counseling Course and Debtor Education Course.
Contact the course providers directly to determine if you’re eligible.
They will guide you through the process of applying for a fee waiver.
2. File without an attorney and pay filing fee
Another option people may consider is to continue filing without a lawyer, but paying the filing fee.
In this case, the individual may not qualify for the filing fee waiver due to his/her income being too high.
3. File Chapter 7 bankruptcy with an affordable attorney
Let's discuss finding an affordable attorney.
a) Can You Find a $500 Bankruptcy Attorney?
Finding a bankruptcy attorney for $500 is rare, but not impossible. Use the attorney fee calculator and free consultations to see if you can find a lawyer who fits this budget. Here are the main factors that influence bankruptcy attorney fees:
- Type of Bankruptcy: Chapter 7 cases without complications are usually cheaper.
- Location: Fees vary significantly by region.
- Attorney’s Experience: Less experienced attorneys may charge lower fees.
- Case Complexity: Simpler cases cost less.
- Involvement: If most work is done by paralegals, fees are lower.
Check if you meet these conditions to find a $500 attorney. You might also explore local legal aid or nonprofit organizations for additional assistance.
Explore Chapter 13 Down Payment vs. Chapter 7 Fees
Some attorneys might accept a $500 down payment for a Chapter 13 case but require full payment upfront for Chapter 7. Clarify with your attorney whether they offer flexible payment options for Chapter 7 cases.
b) Can you request a payment plan?
There are two types of installment plans that attorney may be able to offer you.
Installment Plans Before Filing
Many attorneys offer installment plans before filing your Chapter 7 case.
This allows you to pay weekly or monthly while they work on your bankruptcy forms.
Once you’ve paid the full amount, they file your case.
Ask about payment terms, interest rates, and if they accept credit card payments.
Installment Plans After Filing
It’s harder to find attorneys who accept post-filing payments because their fees are discharged through the Chapter 7 case.
However, some might agree to this arrangement. Confirm the details and ensure you understand the terms before proceeding.
4. Borrowing money from family or friends to file bankruptcy
Some people borrow money from friends or family to cover bankruptcy costs.
Be cautious with this option. You cannot repay the loan before or during your Chapter 7 case. Disclosure of such debts is required on your bankruptcy forms.
These debts are typically discharged, but you can repay them after your case is closed.
Additional Considerations
Gather Your Documents
Before filing, collect all your financial documents, including debts, income, assets, expenses, and tax returns for the past four years.
Well-organized records make the process smoother and help you avoid mistakes.
Stay Updated
Bankruptcy laws and forms change regularly. Use the latest information from the United States Courts website and check for updates before filing.
This ensures you’re using the most current forms and guidelines, reducing the risk of errors.
Conclusion
Filing Chapter 7 bankruptcy with no money is challenging but doable. Consider fee waivers and free legal aid. If you feel confident, you can also file without an attorney.
Borrowing from family or friends is an option, but proceed with caution. Your goal is to get a fresh start, so choose the best path for your situation.
Take control of your financial future with the right resources and information.
