How Can I Afford to File Bankruptcy?

The changes in the bankruptcy laws in October of 2005 did not have much effect on whether a person could file a case under Chapter 13 or Chapter 7 for the vast majority of people that are considering the filing of a case.  The bankruptcy amendments to the Bankruptcy Code (called “BAPCPA”) did make filing more complicated and time consuming.  Prior to the enactment of BAPCPA, a typical  bankruptcy case required the filing of 25 to 30 pages.  After the enactment of the amendments, lawyers must obtain and review much more information from their clients and the typical filing results in the filing of 45 to 60 pages.  The result has been that bankruptcy lawyers and their staff spend a lot more time on one case than they did prior to October 17, 2005.

The additional time required has resulted in increased court costs and attorney’s fees.  Some clients have told me that they were told that they could not afford to file a bankruptcy case because of the expense.  However, there are ways to hold down the up front cost for our clients, especially in chapter 13 cases.  This can be done by placing most of our attorney’s fees in chapter 13 cases in the chapter 13 plan.  Thus, when a client pays his/her plan payment, that client is paying our attorney’s fees along with the other debt he/she is paying though the plan.  Since for many clients, we are able to reduce the interest rate on his/her auto loan to around 5.0% and on some loans, we can set up the plan to pay the value of the collateral instead of the full loan, many times our clients are paying a plan payment for less each month than they were paying for their auto loan or auto loans before they filed the case.   There are many factors determining how much our client’s plan payment will be, some of which are:

* Income and expenses of our client
* Payoff of the secured loans in some instances
* Value of the collateral in other instances
* Amount of priority debt (most taxes, child support, etc)
* Value of assets that are not exempt (See Exemptions in Mississippi)
* Length of the plan (36 to 60 months, depending upon needs and amount of income in household)

We do not have as many options in chapter 7 cases, but many people can still file after making monthly payments to pay the fees and court costs.  Sometimes, clients file chapter 13 cases until to hold of creditors until they get their tax refund, then convert to a chapter 7 case.

As stated in other places on this website, a person can meet with us for an initial appointment at no cost whatsoever to find out the costs, how the cost can be paid, and the advantages and disadvantages in filing chapter 7 or chapter 13 along with his/her options other than filing a bankruptcy case.

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