If you're considering filing for Chapter 7 bankruptcy, you're probably wondering how much it will cost. After all, money problems are the reason you're considering bankruptcy in the first place. While other costs are involved, your most significant expense will be what you pay your lawyer to handle your bankruptcy case. We surveyed readers across the United States to find out how much they paid their attorneys for Chapter 7 cases and why some paid more than others. Here’s what we learned.
How Much Do Bankruptcy Lawyers Charge for Chapter 7?
Our survey showed that, on average, readers paid their lawyers $1,450 to file for Chapter 7 bankruptcy. Four in ten (40%) paid between $1,000 and $1,500, while some paid as little as $500 or as much as $5,000.
This wide range is not as surprising as you might think. The amount you pay a bankruptcy lawyer will depend on your unique financial situation and the type of attorney you prefer.
Expect to Pay Higher Fees in 2023 and 2024
Our figures were gathered before inflation increased the costs of most goods and services. As a result, don't be surprised to be quoted an amount higher than what we've stated here, likely up to 25% more if bankruptcy legal fees track other attorney fee increases. Because prices vary, call several local bankruptcy lawyers to determine the average price in your area.
Also, most lawyers charge a "flat" or fixed fee that will cover the preparation of your Chapter 7 bankruptcy petition and attending your court appearance. When quoting the flat fee amount, many attorneys consider the difficulty of your case to estimate how much work they'll have to do on your behalf. Here are some issues that might increase the time needed for your case and, therefore, the amount of the flat fee the lawyer will charge.
Higher Income and Assets Can Mean Higher Attorneys' Fees
Your attorney might charge you a higher fee if any of the following statements are accurate about your income or property (especially any of the last three):
- You make more than the median income in your state for your household’s size.
- You have multiple sources of income.
- You have a retirement account or a pension plan.
- You’re filing a business bankruptcy (or a personal bankruptcy, but you own a business).
- Your case is an "asset case" (funds will be available to distribute to creditors).
- You have equity in your house, car, or other assets (meaning the property is worth more than you owe).
- You want to keep more property than you can exempt in bankruptcy under your state’s exemption statutes.
In our survey, readers in households with more than $6,000 in monthly income ($72,000 per year) reported paying average attorneys' fees of $300 more than the average average.
More Financial Hot Water Can Mean Higher Attorneys' Fees
Our survey showed that having more debt typically didn't mean higher attorneys' fees. However, your lawyer might charge you a higher fee if you have any of the following issues that could complicate your case (especially any of the last four):
- You have a large number of creditors.
- You’ve filed for bankruptcy within the last eight years.
- You want to stop an eviction, foreclosure, bank levy, or wage garnishment.
- You have liens filed against your property.
- You are involved in litigation in state or federal court.
- You anticipate being accused of engaging in fraudulent activity (including making credit card purchases without intending to pay them back).
- You have nondischargeable debts (debts that don’t go away in bankruptcy).
Personal Issues Can Affect Attorneys' Fees
The following issues might complicate things just enough for a bankruptcy lawyer to charge you a higher fee:
- You’re separated but not yet divorced.
- You must pay spousal support, child support, or equalizing payments based on the property division in your divorce.
- You have a rocky relationship with an ex-spouse or ex-business partner.
The more of these problems you have, the more likely an attorney will ask you for more money before representing you. Retaining a knowledgeable attorney who is well-versed in your local court's procedures and practices in complicated cases is always a good idea.
When Bankruptcy Attorneys Offer Reduced Fees
If your income is low enough to qualify for a waiver of the bankruptcy filing fee (see below), you might be able to find an attorney who will handle your case at a reduced rate. Chapter 7 cases for very low-income filers usually involve a limited amount of property, few creditors, and therefore minimal work for the lawyer. In our survey, readers who were unemployed when they filed for bankruptcy reported paying attorneys' fees of about $250 less than the average.
How the Type of Bankruptcy Attorney Affects the Fee
Some people want to collaborate closely with their bankruptcy lawyer, while others prefer as little contact as possible. The level of attention you require can be a factor in determining your fees.
For example, firms practicing bankruptcy law exclusively save money by hiring paralegals to prepare paperwork. An attorney will review your petition for accuracy but might not participate in the entire process. The benefit of using this type of firm is that you might pay attorneys' fees of $1,000 to $1,200 for a straightforward Chapter 7 case.
By contrast, an attorney with a small caseload might have more time to handle new cases and might be willing to undercut the price of bankruptcy firms (although you may want to research why that might be). Such attorneys could charge as little as $500.
Other lawyers with smaller practices might take a hands-on approach and be there to consult with you throughout the entire process. You can expect to pay more for that service: $1,500 to $2,000 for a standard consumer bankruptcy case.
To help you meet your particular needs, here are some questions you can ask during your consultation:
- Who will complete my paperwork?
- Who will answer my questions if I call the office?
- Will you or a junior attorney go with me to the 341 meeting of creditors?
Do You Need a Bankruptcy Lawyer?
Filing for bankruptcy is not only complicated, but it can also have serious, long-term financial consequences if you make a mistake. The stakes are even higher in Chapter 7 bankruptcy because you generally can’t stop the process once it's underway. So if you’re considering hiring an attorney, you’re not alone. In our survey, 95% of our Chapter 7 filers hired a lawyer to represent them.
But of course, not everyone has the money for an attorney. Some folks on a limited budget aren't comfortable filling out bankruptcy forms themselves and choose to enlist the help of a bankruptcy preparer. However, remember that a bankruptcy preparer cannot represent you in court or give legal advice, such as which debts or assets to list in your bankruptcy. The U.S. Supreme Court decides the maximum amount a bankruptcy preparer can charge (currently $200), but the cap may be lower in your district court. Any bankruptcy preparer is obligated to tell you the local limit.
Additional Fees and Costs When Filing Bankruptcy
Here are a few other expenses you’ll likely have to pay for when you file Chapter 7.
Filing fees. In addition to the fees you pay your attorney, you’ll have to pay the bankruptcy court’s filing fee of $338 (effective December 2020) unless you qualify for a waiver because you earn no more than 150% of the national poverty guidelines.
Bankruptcy counseling course fees. Everyone filing for Chapter 7 bankruptcy must take two counseling courses. These courses should cost about $60 or less. Discounted courses are available for low-income people.
Litigation fees and costs. If your bankruptcy involves litigation, you'll owe your attorney more money. According to our survey, most (95%) Chapter 7 bankruptcy cases moved through the process without incident. However, not all cases do. In a small percentage of cases, a creditor will object to the bankruptcy court's discharging a debt on the grounds of fraud, including making credit card purchases or taking cash advances without intending to pay them back.
If a creditor files an “adversary proceeding” for fraud (which is unlikely), you’ll need to pay your bankruptcy attorney additional fees to oppose the adversary proceeding on your behalf. Your regular bankruptcy fee does not include representing you in this type of litigation.