What to Do If You Can’t Afford to File Bankruptcy

I Need to File Bankruptcy But Can’t Afford It: What You Can Do

Are you struggling financially and considering filing bankruptcy? Have you said the words, “I need to file bankruptcy but can’t afford it!” Here is a quick guide on ways you can file Chapter 7 or Chapter 13 bankruptcy with little or no money.

Apply for a Chapter 7 Filing Fee Installment Payment Plan

You have done your homework, and you know that the filing fee for a Chapter 7 bankruptcy case is $335. If you do have a steady income source but do not have the entire filing fee in a lump sum, you can apply to pay the court filing fee in installments over time.

You will provide your personal information and your spouse’s if you are filing jointly. You will also disclose your family size, income, and expenses before proposing a payment plan in four (4) payments or less. You will have 120 days from the date you file your bankruptcy case in which to pay the filing fee. An installment schedule could look like this:

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  • $95 paid on the day you file your case, for example, April 1

  • $80 to be paid on May 1, 2020

  • $80 to be paid on June 1, 2020

  • $80 to be paid on July 1, 2020

A hearing will be scheduled and the court will either approve the application or deny the application. Keep in mind that if the application is approved and you fail to make a scheduled installment payment, your bankruptcy case can be dismissed.

Apply for a Chapter 7 Filing Fee Waiver

You have done your research, and you know that the court requires a filing fee of $335 to file a Chapter 7 bankruptcy case. Did you know you can apply for a Chapter 7 filing fee waiver using Form 103B? You can. You will be eligible for a fee waiver if:

  • You are filing bankruptcy as an individual (business debtors cannot get a fee waiver)

  • You are filing bankruptcy under Chapter 7;

  • You cannot afford to pay the filing fee in installments over 120 days;

  • Your family income is not more than 150% of the poverty level for your state.

When you complete your filing fee waiver application, you will provide your family size, family income, expenses, how much cash you have on hand, the balances of your bank accounts, and the value of your home and personal property. This information should correspond to the figures from your bankruptcy petition Schedules I and J (income and expenses), as well as Schedule A/B (property).  You will also disclose what you paid in attorney fees for this filing and whether you ever filed a bankruptcy petition in the past. Lastly, you will explain why you cannot pay the entire filing fee or pay it over time in installments. The bankruptcy court will either:

  • Issue an order granting a waiver of the filing fee,

  • Schedule a hearing at which you must appear, or

  • Issue an order denying fee waiver and ordering a fee payment schedule.

How to Pay Chapter 7 Attorney Fees

Many attorneys will offer you a payment plan on their attorney fee. Take advantage of this! The only caveat is that the entire attorney fee must be paid prior to filing bankruptcy. Otherwise, your attorney would become one of your unsecured creditors, and the attorney fee would be discharged through the bankruptcy filing. No attorney will allow that to happen.

Apply for a Pro Bono Chapter 7 Attorney

Every state offers pro bono bankruptcy services through a legal aid organization. Individuals and families that are eligible for pro bono (free) legal representation will have to qualify for legal aid according to their income. Most often this income limit is expressed as a percentage of the federal poverty line. If you qualify for pro bono representation, your attorney will also help you file your application for a fee installment plan or waiver (noted above), depending upon your circumstances.

Represent Yourself Pro Se

Some Chapter 7 cases are more complex than others. If you own a business, have significant assets, or there is a chance your creditors can claim you committed fraud, you will likely need an attorney to help you file. However, if you have a simple case you may be able to manage to file Chapter 7 “pro se” (i.e. on your own). A simple Chapter 7 is one in which you have primarily credit card or medical debt, you do not own real property, and you do not owe priority debts like taxes, alimony, child support, or government fines or fees. If you are at all uncomfortable with trying to represent yourself in your bankruptcy filing, do not do so. You will have to meet with the Chapter 7 Trustee on your own, fill out all of the paperwork correctly on your own, and research bankruptcy law to figure out how it applies to you. You will also have to deal with any creditors who object to discharge or who show up to question you under oath in the 341(a) meeting of creditors. Failing to comply with the court’s requirements and rules will cause your case to be dismissed. According to Ed Flynn of the American Bankruptcy Institute (ABI), in 91.5% of the 486,347 Chapter 7 cases filed in 2017, the debtor was represented by an attorney. In these cases, 96.2% of debtors received a discharge. Pro se debtors received a discharge in only 66.7% of filings.

How to Pay Chapter 13 Attorney Fees

Chapter 13 bankruptcy is all about the payment plan. You are filing under Chapter 13 because:

  • You make too much money to qualify to file Chapter 7;

  • You have auto loan or mortgage arrears you need to catch up on;

  • You have alimony or child support arrears you need to catch up on;

  • You have an income tax, government fines or fees, or student loan arrears you need to catch up on.

Adding up your arrears and crafting a Chapter 13 repayment plan over three or five years with applicable interest, and accounting for the Trustee’s administrative fees, is a complicated matter best left to an attorney to calculate and have confirmed (approved).

Most Chapter 13 attorneys allow part or all of their fees to be paid through the Chapter 13 plan - meaning, your attorney gets paid in full over time, just like your other creditors. This makes obtaining the Chapter 13 legal representation you need affordable for just about anyone.

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Veronica Baxter- is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy Philadelphia bankruptcy attorney. She lives in a renovated south Philly rowhome with her husband John, their two rescue poodles, Connor and Camelot, a full aquarium of African Cichlids, and several rescue cats (the number changes almost daily).