How Much Does it Cost to File Bankruptcy

Filing bankruptcy may be the only option for consumers and companies, trying to seek exoneration from discharging debt obligations, when all else fails. Restructuring under Chapter 11 and liquidation are the two options available to companies, while individuals have the right to liquidate their assets provided they qualify The Bankruptcy Means Test that allows them to file under Chapter 7 of the US Bankruptcy Code. For wage earners, Chapter 13 may be the best option. Filing bankruptcy under Chapter 7, 11 and 13 has been discussed in the article, "Bankruptcy Chapter 7,11,13". The monetary costs of filing bankruptcy are surprisingly less considering other repercussions that may force people to explore the alternatives to bankruptcy.

How Much Does it Cost to File Bankruptcy?

Chapter 7
In case of a Chapter 7 bankruptcy, the debtor's assets are classified as exempt and non-exempt for the purpose of satisfying the claims of the creditors. The trustee liquidates non-exempt lien free assets by selling them in a manner that would assuage the claims of the creditors. In case the debtor is a sole proprietor, the trustee may be required by the court to operate the debtor's business for a limited period of time to ensure maximum returns to the creditors. The courts charge $245, $39 and $15 as filing fee, miscellaneous administrative fee and trustee surcharge respectively. The filing fee, that is collected by the clerk at the time of filing the petition, may be paid in installments with prior permission from the court. Debtors may be allowed to pay the filing fee in four installments or less. The duration between filing the petition and paying the final installment cannot exceed 120 days, except under excruciating circumstances when the court allows the debtor a grace period of 60 days. The administrative fee and the trustee surcharge may also be paid in installments. The court may exempt a debtor from paying fees if the debtor's disposable income is less than 150 percent of the poverty level income. Couples, filing jointly, are required to pay the aforementioned fees and surcharge only once.

Chapter 13
Chapter 13 is the wage earner's plan that helps the debtor discharge the secured, priority and unsecured assets over a period of 5 years. The petitioner is expected to pay the money to the trustee who hands over the money to the creditors concerned. The trustee thus acts as an interface between the debtor and the claimants. The courts charges a $39 administrative fee and a filing fee to the tune of $235. The facility of paying the fee in a maximum of four installments within a period of 120 days is pursuant to the dictates of the court.

Chapter 11
Since Chapter 11 is meant for companies desirous of undergoing restructuring, the courts are required to charge $1,000, from the petitioner as filing fee, in addition to a $39 miscellaneous administrative fee, assuming that the debtor voluntarily files bankruptcy. The debtor is also expected to pay a quarterly fee to the trustee until the case is converted or dismissed. The trustee imposes restrictions on the company, that may be a sole proprietorship, a partnership or a corporation, regarding reporting monthly income and expenses. Hence, it's evident that the trustee has huge administrative responsibilities in a Chapter 11 reorganization.

Although, the above discussion would have clarified the monetary costs of filing bankruptcy, the question - How Much Does it Cost to File Bankruptcy, can be best answered by exploring the economic rather than the accounting costs of filing bankruptcy. The article, "Which is Worse: Bankruptcy or Foreclosure", discusses the actual penalty of filing bankruptcy that can scarcely be measured in monetary terms.