Filing Bankruptcy: Understand Cost and Means Test Qualification
You have experienced financial hardship and are considering filing for bankruptcy, but you’d like to understand the cost and how you qualify. As such, you should know that bankruptcy is a legal option that provides debt relief when debt is overwhelming. Many are concerned with whether they can afford bankruptcy though. The cost is often variable based on the state where you live.
A common question is how much does bankruptcy cost. Firstly, you should consider which type of bankruptcy you are considering.
A Chapter 7 bankruptcy filing fee can cost between $300 and $350. A Chapter 7 bankruptcy attorney can cost between $500 – $3000 depending on factors like your location and the complexity of the case. Please note that this is an estimate.
A Chapter 13 bankruptcy filing fee can cost between $300 and $350. A Chapter 13 bankruptcy attorney can cost between $2500 – $6500 depending on factors like your location and the complexity of the case. Please note that this is an estimate.
Let’s talk about types of bankruptcy. A Chapter 7 bankruptcy is often cheaper, but you have to qualify. You may lose assets in a Chapter 7 bankruptcy, but there are also bankruptcy exemptions that can protect assets. You can often receive a bankruptcy discharge in about 120 days. The bankruptcy is on your credit report for 10 years.
A Chapter 7 bankruptcy is often less expensive than a Chapter 13 bankruptcy. You can often protect our assets in a Chapter 13 bankruptcy, but it’s often a payment plan of 3 or 5 years. A Chapter 13 bankruptcy is on your credit report for 7 years.
Now that you understand the cost of bankruptcy, let’s discuss how you qualify for bankruptcy.
Bankruptcy Means Test to Estimate Qualification
To qualify for bankruptcy, you have to go through something called the bankruptcy means test in your state. The means testing established by the government helps determine whether you have the “means” to pay back some of your creditors.
If you pass the means test, you can often qualify for Chapter 7 bankruptcy. To estimate qualification, you can take a Chapter 7 bankruptcy means test calculator that is specific to your state. For example, the bankruptcy income limit for California is different than the bankruptcy income limit for Texas. Each state has its own requirements for passing the means test.
If you are above the median income for your state, you may still be able to take the means test by taking part 2 of the bankruptcy means test. This is where you can use certain expenses to justify to the courts that you do not have the “means” to pay back your debt.
Another important thing to note is that the median income level for bankruptcy means test updates every 6 months or so. For example, your household income may not be below the median level for the means test today, but it may be in the future if your income remains static and the income level for your state increases.
Finally, in many situations, you can speak with a local bankruptcy attorney regarding whether you qualify for a Chapter 7 bankruptcy under the bankruptcy means test. Local attorneys often provide free initial consultations to help you understand whether bankruptcy is the right option for you.
Bankruptcy is a difficult decision for many people going through financial hardship. You can estimate your cost and qualification to see whether bankruptcy is the right option for you.
You can also look at bankruptcy alternatives. Common alternatives to bankruptcy include debt settlement and debt management. In debt settlement, a company or you would negotiate directly with each one of your creditors for lesser than what is owed. These companies are often for-profit companies. In debt management, a company would negotiate directly with your creditors (often banks with credit cards) for a lesser interest rate. Both these options may provide some payment relief to your creditors.
When in doubt, you can often speak with a local bankruptcy attorney in a free consultation to make the most informed decision. You can also speak with a debt management company or a debt settlement company for a free evaluation. You may be surprised by how helpful it can be to be informed of each debt relief option before taking the plunge.