How Much Does a Bankruptcy Lawyer Cost?
by Unbundled Legal Help
When you find yourself in a complicated financial situation and are considering filing for bankruptcy, the cost of associated legal fees becomes important.
Bankruptcy lawyer fees can start at over $1k and go up to over $6k—depending on your case, bankruptcy chapter, and other factors. This can quickly become an additional burden under already uneasy conditions. Fortunately, there are options that allow you to bring down the cost of your legal fees.
What Is bankruptcy law?
Bankruptcy involves a set of legal procedures initiated by a person or business when they are unable to pay their debts.
To file for bankruptcy, the debtor will need to file a petition. In some cases, the petition can also be filed on behalf of creditors.
The assets of the person or company in debt will then be evaluated, and a part of them may go towards repaying the outstanding debts.
Bankruptcy grants both individuals and businesses in debt and their creditors a way out of a very complicated financial situation. Debtors are granted a chance to have their debts forgiven and start fresh, and creditors get access to some form of repayment via liquidated assets of the debtors.
There are several types of bankruptcy filings. They are classified according to the section of the U.S. Bankruptcy Code under which they are filed. This includes Chapter 7, Chapter 9, Chapter 11, Chapter 12, and Chapter 13.
Chapter 7 bankruptcy
Chapter 7 bankruptcy is typically a consumer bankruptcy, also referred to as liquidation bankruptcy or straight bankruptcy. It is one of the most popular bankruptcy filings in the United States. Filing for Chapter 7 bankruptcy is a way to reset your financial situation when you can’t pay your bills and you risk losing your home and more. It lets you clear most of your debt but will result in the loss of some possessions and a substantially lower credit score.
Chapter 9 bankruptcy
Chapter 9 bankruptcies are filed by cities and other municipalities. The aim of such filings is to restructure debts to avoid the sell-off of all assets. These types of filings are considered the last resort for municipalities when they can’t pay back their debts to their creditors.
Chapter 11 bankruptcy
Chapter 11 bankruptcy is a petition to restructure debt filed by a company. It allows the debtor to present a plan that will allow them to pay off creditors over time while not losing their business.
Chapter 12 bankruptcy
Chapter 12 bankruptcy can be filed by family farmers or family fishermen. It allows family businesses in trouble to propose an alternative plan for repaying their debts partially or in full.
Chapter 13 bankruptcy
Chapter 13 bankruptcy is meant for individuals with regular income (employees) who find themselves over their heads financially. Filing for Chapter 13 bankruptcy allows debtors to propose a debt repayment plan and pay off what they owe in installments over a period of time.
What Does a Bankruptcy Lawyer Do?
Filing for bankruptcy, as unfortunate as it sounds, can be an efficient solution for getting out of a very difficult financial situation and overcoming the burden of heavy debt. It can help your creditors get some or all of their money back and give you the option to propose a debt repayment plan that won’t ruin you financially.
If you are filing for personal bankruptcy, you are not legally required to have legal representation. However, if you do find the legal proceedings daunting, a bankruptcy lawyer can take away a lot of your headaches.
A bankruptcy lawyer provides you with legal advice, handles related paperwork, and oversees the whole process from start to finish. Both debtors and creditors can use bankruptcy lawyers. Here are some of the most common services performed by a bankruptcy lawyer:
- Navigating the legal process. Bankruptcy proceedings can be quite complex—and each situation requires a customized approach. A lawyer can help you decide which bankruptcy chapter best fits your case. They can also advise you on the specifics of bankruptcy filing in your district.
- Preparing the paperwork. Bankruptcy filings require quite a lot of paperwork. Lawyers specializing in such proceedings generally have specialized software that helps them efficiently fill in and sort through all the needed forms. Be prepared to supply your lawyer with all the needed financial information: income, expenses, assets, debt, and more.
- Representing you at hearings. Once a debtor has filed for bankruptcy, they will need to attend a court hearing known as the 341 Meeting of Creditors. A bankruptcy lawyer will accompany and represent you at this and other related hearings.
- Discharging debt and recovery. Your bankruptcy lawyer can also help you with the follow-up of your bankruptcy proceedings. They will guide you through the discharge process (the release from debt liability) and recovery (identifying the causes of your bankruptcy and offer guidance on how to avoid the same situation in the future).
Do I Need a Bankruptcy Lawyer?
Personal bankruptcy cases don’t require you have legal representation. However, this may not be the most effective way to go about handling your case. Hiring a bankruptcy lawyer can help you save time and make the procedure less stressful. Here are some of the benefits of hiring a bankruptcy lawyer:
- Guidance on which bankruptcy chapter to file under
- Help filling in and filing paperwork
- Negotiation help on mortgages, car loans, and other debts
- Assistance with creditors (your bankruptcy lawyer will take on the stress of talking to creditors on your behalf.)
If you prefer to represent yourself in your bankruptcy filing, be prepared to do substantial research. Bankruptcy filings can get complicated, and you may have strict paperwork deadlines to meet. If possible, get a free consultation from a bankruptcy lawyer.
Are Bankruptcy Lawyers Expensive?
Most bankruptcy lawyers charge a flat fee for a bankruptcy filing case. The exact amount depends on a number of factors: the complexity of your case, the chapter you are filing under, the number of court hearings, and more.
For instance, lawyer fees for bankruptcy filings under Chapter 7 may range from $1,000 to $3,5000, based on the specifics of the case. On the other hand, filing under Chapter 13 will generally be more expensive—up to $6,000.
In some cases, hourly rates are also an option, but these are quite rare when it comes to consumer bankruptcy proceedings. And be ready for your lawyer to charge an additional hourly fee for any extra work not included in the flat rate package.
While larger law firms may have higher marketing costs—and thus higher prices for legal services compared to solo practitioners—they may also offer lower fees because of the larger volume of cases.
New lawyers typically charge less compared to more experienced lawyers. If your case is simple and you only need help with paperwork and a standard court hearing, hiring a less experienced lawyer may be a good way to cut costs.
How Can I Save Money on Bankruptcy Filing Fees with Unbundled Legal Services?
Most lawyers charge a flat rate for a package of services related to bankruptcy filing. Because this is a comprehensive set of services that includes evaluating your case, preparing related paperwork, attending court hearings, managing follow-up proceedings, and more, the costs for these packages can be quite high. If you need a bankruptcy lawyer to oversee your entire case, these costs may be unavoidable.
On the other hand, if your case is relatively simple, and you only need a lawyer’s help in some stages of the process (for instance, filing paperwork or attending a court hearing), you may benefit from using unbundled legal services. Also known as limited legal services, this approach is based on providing the client only the legal services they need for a fixed price.
Using unbundled legal services can help you cut costs significantly, bringing your overall expenses to as low as $500 to $1500.
With that, keep in mind that unbundled legal services may not be the best fit if your bankruptcy case is complicated. In this case, you can still consult one of the lawyers we work with in search of full representation. As our company works with smaller legal firms and solo practitioners, you may still be able to benefit from lower legal fees.