What Are the Costs Associated with Bankruptcy Filing in California?

When you are struggling with debt and cannot keep up with monthly bills, you are certainly concerned about your expenditures down to the smallest detail. Therefore, if you are looking into bankruptcy as a solution for crushing debt, you will also be wondering about the potential costs. On the one hand, there are certain filing fees involved with your case that are part of the Chapter 7 or Chapter 13 process. On the other, you could incur costs that are indirect or considered an investment in your future. Before moving forward, you should be aware of all costs associated with bankruptcy filing in California.

You might feel overwhelmed by the idea of incurring expenses when your debt situation is already a problem, but the benefits of bankruptcy are considerable. With both Chapter 7 and Chapter 13, you could be debt-free and able to take advantage of new financial opportunities. You will no longer be making minimum monthly payments, just to have the amounts absorbed by interest and late fees. Retaining a California bankruptcy lawyer helps you reach your objectives, but some information about costs for bankruptcy is useful. 

Costs for Filing Chapter 7 Bankruptcy in California

If you seek to file bankruptcy as an individual or married couple, Chapter 7 may be an option to consider. With this type of case, you discharge all qualifying debt during the process. The key with Chapter 7 is that you must meet strict eligibility criteria, which include:

• Your earnings are less than the state median income level for California, based upon a household of your size; or,
• Your earnings exceed the state median income level, but you meet the Means Test that assesses your monthly expenses.

Note that liquidation is part of the Chapter 7 process. This means the bankruptcy trustee has the power to sell assets to satisfy your debt to creditors. However, you can protect property through exemptions. Plus, the bankruptcy trustee may opt not to liquidate certain personal property. For those that qualify, you can expect to pay $338 in filing fees to the US Bankruptcy Court for the Northern District of California. There may be additional costs for specialized proceedings.

Filing Fees for Chapter 13

In a Chapter 13 case, you are also able to discharge qualifying debt. However, the process is different compared to Chapter 7. The eligibility criteria are also relaxed, so you must simply show that you have a job to qualify for this type of bankruptcy.

The focus of a Chapter 13 case is your debt repayment plan. First, your debts are combined and restructured, reducing them into a single monthly payment you can afford. The employment requirement exists to ensure you are able to stay current with the debt repayment plan. Through this arrangement, you pay back creditors over a period of 3 to 5 years. As such, there is no liquidation as there would be with Chapter 7.

For a Chapter 13 case, you must submit $313 in filing fees along with your bankruptcy petition. You should keep in mind that you could convert a Chapter 13 case to Chapter 7 if you have a job loss or other reduction in income. In such a case, there is a conversion fee.

Reasons to Retain a California Bankruptcy Attorney

Filing fees are necessary for both types of bankruptcy, but there are also legal costs when you make the wise decision to retain legal counsel for a Chapter 7 or Chapter 13. Even before you file your bankruptcy petition, there are essential tasks and requirements you must meet. You must make the important decision regarding the best process for your circumstances, including an assessment of eligibility rules and which type of bankruptcy will help you achieve your financial goals. Mistakes and delays can be expensive, resulting in delays or even a dismissal of your case.

A knowledgeable California bankruptcy lawyer will guide you in making these important decisions, ensuring you maximize the benefits of the process. To summarize the costs for legal services, it is possible to work out an arrangement for a flat fee in many Chapter 7 cases. Some firms will also do flat fees for Chapter 13, while others will quote an hourly rate because of the increased complexity.

Steps in the Bankruptcy Process

Besides help with making decisions on Chapter 7 and Chapter 13, you can also count on a California bankruptcy lawyer to guide you through the legal steps. It is crucial to get help with:

• Coordinating the credit counseling course that you are required to take within 180 days of filing your petition;
• Gathering and organizing all financial paperwork on your assets, debts, income, and expenses;
• Preparing and filing your bankruptcy petition, along with all relevant schedules;
• Collaborating with you regarding exemptions for a Chapter 7 case;
• Developing your debt repayment plan for a Chapter 13 bankruptcy;
• Advocating on your behalf during the meeting of creditors, in which you will be asked questions about your bankruptcy petition and financial status; and,
• Wrapping up all requirements for your case and obtaining the final bankruptcy discharge order.

Benefits of Chapter 7 and Chapter 13

Your investment in legal representation is worthwhile when you consider the advantages of bankruptcy. Emerging from the process debt-free relieves you of the stress associated with being in debt and owing creditors. In time, you will qualify for new financial opportunities that were unavailable to you when you were struggling with debt. Plus:

• With both types of bankruptcy, you enjoy the automatic stay that prohibits creditors from collection activities.
• Though bankruptcy remains on your credit report for 7 to 10 years, this time period may actually be shorter compared to trying to pay down debt on your own.
• Your credit score will take a dip when you file for bankruptcy, but you can create a positive track record of payments by staying current on your mortgage, utilities, and monthly bills.
• In Chapter 13, you can protect your interests in your home. By continuing to pay your mortgage, you avoid foreclosure. In your debt repayment plan, you can discharge late fees and arrearages.

Discuss Options with a California Bankruptcy Attorney

As you weigh the costs associated with bankruptcy filing in California, it is helpful to review them alongside the potential benefits of Chapter 7 and Chapter 13. Our team at Kostopoulos Bankruptcy Law can explain the advantages and help you understand what your life would look like if you choose bankruptcy as a solution. For more information about what to expect, please contact us to speak to a California bankruptcy lawyer. We can schedule a consultation to review your circumstances and get started with the process.