What Does Bankruptcy Cost?

We consider the cost of going bankrupt and understand how these costs can be paid.

If you are thinking about bankruptcy one thing you will need to understand is the cost involved and how to pay this.

When you apply for bankruptcy at your local court you will have to pay a fee on the day. Unless you pay this fee in cash your bankruptcy application will not be processed.

You must therefore understand what this fee will be and get the necessary bankruptcy help to decide how get the money together to pay it.

The bankruptcy court fees

The bankruptcy cost is currently £700 per person. This is made up of a Court Fee of £175 and what is known as a bankruptcy deposit of £525.

The full £700 must be paid to the court clerk on the day you go to the court with your bankruptcy application form.

You must pay in cash as the court will not accept cheques or card payments.

It is vital that you remember to take your cash to pay the bankruptcy cost on the day. If you forget you will not be able to go bankrupt and will have to return to the court on another day.

Options to reduce bankruptcy costs

In certain situations you may be eligible for a waiver of the £175 court fee.

You will not have to pay the £175 court fee if you are currently receiving benefits including income support, jobseekers allowance or working tax credits (as long as you are not also receiving a child tax credit).

Also the court fee will not be payable if your annual income before tax and other deductions falls below certain levels. For example below £13000 if you are single with no children or £18000 if you are a couple.

However whatever your personal financial circumstances you will always have to pay the bankruptcy cost of £525.

How to pay for the bankruptcy fee

One of the main problems with the cost of bankruptcy is that you simply do not have the money available to pay for it.

Most people have to save the money to pay for their bankruptcy. The best way to do this is to simply stop paying all of your unsecured creditors. The money you would have paid them can then be saved towards paying for the bankruptcy fee.

Of course if you stop paying your creditors or more than a month or two, they are likely to start debt collection actions against you. You should therefore not stop making your payments to your creditors unless you have first taken bankruptcy advice from a debt expert.

Many people borrow the money to go bankrupt. This could be from friends or family.

If you have available credit on a credit card or overdraft facility, you could use this to draw cash to pay for the required fee. This is a perfectly acceptable way of borrowing money to pay for the cost of your bankruptcy.

An alternative to paying bankruptcy costs

If you believe that bankruptcy is the right solution for you but you know that you will struggle to pay the bankruptcy cost then an alternative to consider is a debt relief order.

A debt relief order (DRO) is an alternative to bankruptcy which can be used by people who owe less than £15000.

The effects are similar to bankruptcy but the cost is far less with a fee of just £90.

However the problem with the DRO solution is that you will only be eligible to use the solution if you are not a homeowner. Your other assets must not be worth more than £300 (other than you car which could be worth up to £1000) and your disposable income must not be more than £50 a month.

The cost of extra bankruptcy advice

Even though you have to pay for the cost of bankruptcy, the court will not be able to give you any further bankruptcy help such as about whether bankruptcy is the best solution for you or how to correctly complete your bankruptcy application forms.

It is therefore always sensible to speak to a debt expert before deciding to declare yourself bankrupt and you will normally be able to get good bankruptcy advice for free.

However if you want further help and support throughout the bankruptcy process or with completing your application forms you may well have to pay for this.

Generally speaking you will have to pay around £300 per person for professional bankruptcy help. If you are being quoted more than this you should make sure you speak to Beat My Debt.

Weigh up all the factors

Understandably the cost of bankruptcy can be enough to put you off the idea of using this debt management solution.

However if you are worried about paying the bankruptcy fees it is important to weigh these up against the benefits you will get from going bankrupt overall.

If you have taken bankruptcy advice from an expert debt advisor and bankruptcy is clearly the best solution for you then it may well be in your interests to either borrow or take the time to save for the required fees.

Even if saving takes you a number of months, the outcome of declaring bankruptcy will often be far better for you than starting a debt management plan or IVA which could mean you have to maintain monthly payments possibly for many years.

Do I Have to Go to Court When I File for Bankruptcy?

Everyone who files for bankruptcy has to attend a Meeting of Creditors. This meeting is also commonly referred to as the 341 meeting, because the requirement to attend this meeting arises from Section 341(a) of the United States Bankruptcy Code. The hearing will take place approximately 30 days after the case is filed. Though it is referred to as the Meeting of Creditors, creditors rarely actually appear. However, if creditors do appear they are allowed to ask you questions.

Most 341 meetings last approximately 5 minutes and consist of the Trustee asking a series of standard questions to make sure that your paperwork is accurate and that you have disclosed all of your assets. The meeting is an opportunity for you to make the Trustee aware of any information you forgot to include in your bankruptcy paperwork.

You will be sworn in at the beginning of your hearing and you will be testifying under oath. The Trustee will expect you to be familiar with the information contained in your bankruptcy paperwork, so it is always a good idea to review the documents immediately prior to the meeting. This also gives you a chance to ask your bankruptcy attorney any questions you may have.

Make sure to speak with your attorney a week prior to the hearing to discuss what documentation you are responsible for bringing with you to court. You will need to present a valid picture ID and proof of your social security number in order to testify. Most Trustees will want to see bank statements showing the balance in your bank accounts on the day your case was filed and a copy of your most recently filed tax return.

This may seem very overwhelming to you, but you shouldn't feel scared. An experienced bankruptcy attorney can guide you through the entire process.

Hiring an attorney and jumping through a few hoops is a small price to pay to get a fresh start.

What Is Business Bankruptcy and When Should It Be Used?

Filing for Bankruptcy is a process that can help your business eliminate or repay its debt under the protection of the bankruptcy court. One can file for bankruptcy in order to protect oneself from harassment by creditors, and in many cases have part of the debt discharged. It also gives struggling borrowers a chance to reduce losses and reorganize finances. Business bankruptcies are usually described as either liquidation or reorganizations depending on the type of bankruptcy that is needed.

A business becomes bankrupt when it cannot pay its bills. The company can declare itself bankrupt when it feels that its cash flow is not going to be able to pay off all creditors. In most cases, the business's financial status seems hopeless and there is likely no chance of recovery. It is advisable for a business to file for bankruptcy rather than wait to later have creditors impose an involuntary bankruptcy. In such cases, chances are that the creditors may impose a lien on assets that the business's owners must pay. A lien is agreement in which the creditor or bank gets the right to sell the mortgaged or collateralized property of those who fail to meet the obligations of a loan contract.

Types of Business Bankruptcy:

Business Liquidation - Chapter 7

Chapter 7 bankruptcy is also known as liquidation. When the debts of the business are so overwhelming that restructuring of them is not feasible, it is advisable to opt for Chapter 7, or liquidation. It may eliminate unsecured debt like credit cards, medical bills, loans, and utility bills. Student loans, DUI personal injury judgments, trust fund penalties and taxes, and child support cannot be eliminated via Chapter 7.

An attorney or certified public accountant will act as the Chapter 7 trustee, whose job it is to gather your assets and funds and distribute them to creditors. In some cases, you may be able to hold on to some or all of your assets. Your home, 401K, IRA, pension, and cash value life insurance funds are generally exempt from being seized in bankruptcy and are not factored into any payment plan that you may be required to complete to retain control of your assets. Businesses are not protected from being seized by the trustee. Therefore a Chapter 7 is not always the appropriate bankruptcy for self-employed individuals.

Once the assets are distributed and the trustee is paid, a business owner receives a "discharge" at the end of the case. A discharge means that the owner of the business is released from any obligation for the debts. However, partnerships and corporations do not receive a discharge.

Business Reorganization - Chapter 11

Chapter 11 is a better choice for businesses that may have a future. Here the company reorganizes and continues in business under a court-appointed trustee. The owner of the company may actually be the trustee. The company files a plan of reorganization outlining how it will deal with its creditors who vote on the plan. If the court finds the plan is fair and equitable, they will approve the plan. Reorganization plans provide for payments to creditors over some period of time that may exceed twenty years. Chapter 11 bankruptcies are exceedingly complex and not all of them are successful.

Personal Bankruptcy - Chapter 13

Chapter 13 bankruptcy refers to personal bankruptcy. It may stop foreclosure and act as a foreclosure defense to provide you time to repay your secured debts (like your home mortgage or car loans). This Chapter is also known as the wage earner's bankruptcy. If you make more than the state median income, you may be required to file Chapter 13 instead of Chapter 7. Also, if your personal assets are involved with your business assets, as they are if you own a sole proprietorship, you can avoid problems such as losing your house if you file for Chapter 13 instead of Chapter 7.

In this type of bankruptcy, you have to file a repayment plan with the bankruptcy court detailing how you are going to repay your debts. This plan is usually for three to five years, and for it to be approved, you must pass a liquidation test that guarantees payment to the unsecured creditors of at least as much money as you would have received if your assets were sold and distributed in a Chapter 7 liquidation. The amount you will have to repay depends on your earnings, the amount of the loan and the property you own.

What are your options for getting help?

There are many bankruptcy lawyers and bankruptcy law firms that can help you in order to file bankruptcy. They specialize in all legal and corporate matters related to bankruptcy. A bankruptcy attorney can also help negotiate with creditors and prevent common mistakes that can lead to bigger problems in the long run. With knowledge about the Fair Debt Collection Practices Act (FDCPA), an attorney can protect you against creditor harassment - such as being sent a threatening collection letter, ensure that you're not being abused, and give you tips on staying ahead financially after you are discharged.

Apart from that, there are also some organizations that help you guard against harassment by creditors. The Federal Trade Commission (FTC), a consumer protection agency, enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect debt from you. The Act specifies the guidelines under which you can collect debt.

Mortgage Loan Modification, or mortgage modification, can help lower your mortgage payments, make them affordable and keep the roof over your head intact. With the loan modification, you can modify the terms and conditions of a loan, find a reprieve, avoid foreclosure, and even stay in your home. On the other hand, another option is that a loan modification, which is an adjustment in the original terms agreed upon by the lender and the borrower, like interest rates, principal owed and length of the loan. A loan modification is generally filed when the home owner is not able to make a payment or when the lenders does not have proper paperwork.

A loan modifier can help you get a mortgage loan modification and help you avoid foreclosure. Therefore, hiring a loan modification attorney is the right step in the right direction for people facing financial troubles.

Finally, you can receive tax help from your tax problems by means of a tax attorney, which can be used in certain instances to reduce your debts. Certain income tax debts are eligible for discharge under Chapter 7 or Chapter 13 of the Bankruptcy Code. Not all tax debts can be discharged; however utilizing tax lawyers or tax attorneys specialize can greatly increase your chances of reducing extensive debts that maybe owed.

How Do I Go About Declaring Bankruptcy?

The legal process of petitioning for your own Bankruptcy has a number of important stages.

The first stage is to speak to a registered debt charity, such as those listed at the bottom of this article, as it may be that Bankruptcy is not your best option. They will access your financial situation in detauil for free. They will then talk to you about all of the alternatives available to you and recommend which solution they believe is right for your situation. It may be that you qualify for a Debt Relief Order or an Individual Voluntary Arrangement, which may be much more suitable for your situation depending o your level of debt and whether you have any assets (such as a property) to protect.

If an advisor agrees that declaring bankruptcy is the most appropriate solution for your circumstances then you need to complete a bankruptcy petition form, which is your official appeal to the court to be made bankrupt, and a statement of affairs, which contains an in-depth assessment of your financial details and the reasons for getting into debt. The forms are both available to download online at the insolvency service (the official regulator of the insolvency industry) website or is obtainable from your local county court.

Petitioning for your own bankruptcy can cost as much as £622, which is made up of three separate costs:

A court fee of £150 (although you may not be required to pay this if you're in receipt of income support). Bankruptcy deposit of £450. A fee of £12 to swear the affidavit if you're petitioning at the High Court in London.

When declaring bankruptcy you must attend court for a bankruptcy hearing (generally, you should petition at your local court, which is the place where you've lived or worked for the last six months).

After the court has listened to your petition, one of the following outcomes:

A stay in proceedings - the bankruptcy hearing is put on hold until more information is gathered that may be material to the proceedings Decline bankruptcy in order to appoint and Insolvency Practitioner to administer an IVA Decline bankruptcy petition in favour of an Administration Order Decline bankruptcy and refer you to an Approved Intermediary for a Debt Relief Order Bankruptcy Order (which means the petition has been successful)

In theory, the court is supposed to weigh up whether declaring bankruptcy is your best option or whether there are more suitable alternatives. However, in practice, the judges tend to nod them through as county courts are generally overstretched. That's why it's so important that you take impartial advice, you can't rely on the judge to tell you whether you're making a mistake.

Once the Bankruptcy Order has been granted, the court will appoint a Trustee in Bankruptcy to manage your financial affairs. This will be either the Official Receiver or an appointed Insolvency Practitioner.

- National Debt Helpline (0808 808 4000)

- Debt Advice Foundation (0800 043 40 50)

- CCCS (0800 138 1111)

Debt Management In Bankruptcy

Bankruptcy can be a great tool to help alleviate large debt burdens, but there are cases in which people do not find it as useful as they originally thought. The reason is because most people don't know very much about the process and make assumptions as to how the process can help. No two people's financial situation is the same, and neither is the risks or potential benefits associated if the decide to file for bankruptcy. Much confusion can be avoided by learning a few things about the bankruptcy process.

Types of Debt

A common problem people run into when they file for bankruptcy is finding out that a particular debt is not eligible for discharge. Not all debts are the same and different types of debts are handled very differently in the bankruptcy process. For example, there are two main types of debts that are managed in bankruptcy: secured and unsecured. A secured debt is one that is secured against an asset as collateral. These are debts such as a mortgage or car loan, in which the house and car are put up as collateral against the loan in the event of default. An unsecured debt is one that is not secured against any collateral. These are debts such as credit cards, medical bills and other loans, in which are only given in return for the promise of repaying the debt.

A secured debt is more difficult to have discharged in a bankruptcy than an unsecured debt. This is because the creditor maintains the legal right to repossess the asset if the borrower defaults on the loan. To have a secured debt discharged in a Chapter 7 bankruptcy, the borrower is generally required to turn over the asset to the creditor in exchange for being relieved of the debt liability. However, if the borrower intends to keep the asset, they would only be able to have the debt discharged under a Chapter 13 bankruptcy. The borrower would be required to repay the debts in the Chapter 13 case if they are to be eligible to keep the asset.

Unsecured debts are the most common type of debt filed for discharge in bankruptcy. In general, unsecured debts can be easily discharged under either a Chapter 7 or Chapter 13 bankruptcy. The difference being whether or not the filer qualifies for Chapter 7 debt elimination or is required to file for Chapter 13 instead.

Debt Discharge Exceptions

There are a few types of debts that are difficult to manage in bankruptcy and may not even be eligible for a discharge. Tax debts, student loan debts and domestic support payment debts can greatly complicate the bankruptcy process. However, a good rule of thumb is that the only type of discharge these debts would qualify for is a Chapter 13 repayment plan. There are bankruptcy laws that prohibit these types of debts from being discharged under Chapter 7 and are usually required to be repaid, at least in portion.

What Happens When You File Bankruptcy - Are You Doomed?

Knowing from personal experience when someone is contemplating whether to file bankruptcy or not the perception of I will not be able to get any credit forever, these goes the thoughts of every buying a house. And of course there is the option of Chapter 7 or Chapter 13. What is the difference?

Chapter 13 is when there is NO chance or climbing out of debt, millions of Americans got caught up in the mortgage collapse since 2005. Million of Americans lost there homes when the mortgages went upside down with no chance of every reversing itself to right the major collapse we have experienced.

For those who were counting on the equity in their homes we also devastated but not only losing a house but also your nest egg all at one time. Partner that with person loss of a job or business closed down or perhaps a divorce you would be a perfect candidate for Chapter 7 and a whole new start.

Once bankurtupcy is filed it will take a year or to before you are able to get a low credit limit card and start to rebuild your credit, it has taken me now in my third year after filing and also paying a low credit limit card (and annual fee as well $59 and is what you have to pay to get the ball rolling any times, to me a small price to pay to get your credit back on track.

After 18 months of paying before the due date and also paying off the balance (no interest as well) my credit score went from 525 to 625 in that year, now I just got a no annual fee Capital One card with a $2000 limit and my credit score jumped to 675 (consider good credit) all  within a matter of 2 years.

The best part of course is starting over.  Whether its from a failed business, failed marriage or your mortgage that went underwater, you are able to get a new start and get rid of what has happened to over 100 Million Americans over the past 6 years and move forward and start over.

Chapter 13 is for situations that allow for concessions to lower payments on debt if there is a chance to pay off the creditors. Chapter 13 is much more compliance and very strict guidelines must be followed as well.

Filing bankruptcy cost will vary greatly as well, I have found here locally in Detroit the average fee with court cost will be around the $1000 area. Chapter 13 with be considerably more, as always check with a bankruptcy attorney (I would talk to at least 2) and find out exactly what option may be best for your situation.