Bankruptcy Fees: Chapter 7 and Chapter 13

Frequently Debtors ask why their Bankruptcy Fees are different than the fees of someone else they know.  Is there a reason for this?  After all, the filing fees are the same, so why should the attorney fees be any different?

Actually, the filing fees are different.  Chapter 7 presently has a $299.00 filing fee and Chapter 13 has a $274.00 filing fee.  However, even these fees may be reduced or waived if the debtor can prove to the court a financial hardship to pay these fees and have limited income.  Additionally, such filing fees can even be waived even despite paying normal attorney fees!

The Bankruptcy Attorney fees will vary depending upon which chapter is being filed, the jurisdiction you are filing in, the attorney you are using, and the complexity of the case. For instance, in the Southern District of California, there is a “Guideline Fee” for chapter 13 cases that the Bankruptcy Court “off record” requires fairly strict adherence to in the amount of $3300.00 for consumer cases and $4,000.00 in self employed cases.  Fees requested outside those amounts in Chapter 13 cases are strictly scrutinized, frequently denied, and require a separate fee application hearing just to ascertain the propriety of such fees. Accordingly, over 90% of the Chapter 13 Cases request these Guideline Fees.  Moreover, most attorneys do not require all Chapter 13 fees up front since they can be paid to the attorney thru the Chapter 13 Plan and in priority to most creditors.

Chapter 7 fees generally are less than Chapter 13 fees and also vary per the above.  Such fees, by way of example in the Southern District of California, generally range from $1500.00 to $3500.00 for most cases, although its not uncommon for some real estate cases to exceed $5,000.00.  Unlike Chapter 13 Fees, these fees must be paid prior to filing of the case since the attorney is prohibited by the law to attempt to collect these fees after filing since they are no different than any of the other debts to be discharged.

Notwithstanding any of the forgoing, a debtor will generally pay for what they get.  Attorney fees which are extremely low are generally a good indication of minimum services and/or less than competent representation.  Surprisingly and ironically, generally excessive fees also are an indicator of the same, unless your case is complex.

The best advice in evaluating your fees is to start with the reputation of the attorney or law firm handling your case.  Virtually all reputable firms and attorneys will provide the most competent of services at an average attorney fee for that legal community, and the cheaper or excessive fees tend to come from attorneys and/or firms with lower bankruptcy experience and who do not concentrate in Bankruptcy.  

So find out the reputation of the attorney or firm you are dealing with in evaluating your fees.  Getting an attorney by a favorable referral is generally the best rule of thumb, whereas retaining an attorney or firm based upon the cheapest fees generally causes more problems and fees/costs in the long run due to the need to fix errors and other problems arising from inadequately prepared petitions.

Written by Michael G. Doan