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How Much Does it Cost to File for Bankruptcy?

Aparna Iyer Jan 9, 2019
The monetary cost of filing for bankruptcy is a small retribution for actions that may very well be justified, an inkling of the issues that one may encounter in the days to come.
Filing for bankruptcy may be the only option for consumers and companies who are 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.
People have the right to liquidate their assets if 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. The monetary costs of filing for bankruptcy are surprisingly less, considering other repercussions that may force people to go for other options.

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, $75, and $15 as filing fee, miscellaneous administrative fee, and trustee surcharge respectively.
The filing fee collected by the clerk at the time of filing the petition may be paid in installments with prior permission of the court. Debtors may pay the fee in four installments or less. The time between filing petition and paying final installment can't exceed 120 days, except 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% of the poverty level income. Couples filing jointly are required to pay the 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 five 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 court charges a $75 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

As Chapter 11 is for companies wanting to undergo restructuring, courts need to charge $1,176 from the petitioner as filing fee, in addition to a $550 miscellaneous administrative fee, assuming that the debtor voluntarily files for 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.
This discussion would have clarified the monetary costs of filing for bankruptcy, which can be further understood by exploring the economic rather than the accounting costs of filing bankruptcy.