07 Jun What are the down sides of filing bankruptcy?
The first down side of filing bankruptcy is that your bankruptcy is listed on your credit report and remains there for 10 years on a chapter 7 and usually 7 years on a chapter 13. It does not mean, however, that you have to wait that long to get good credit again. Many of my bankruptcy clients have been able to get a mortgage from a bank to purchase a house about 2 years after the bankruptcy. I’ve even had a couple who came to see me 2 1/2 years after they filed a chapter 7, with over $35,000 in new credit card debt. So the bankruptcy goes onto your credit report, but does not prevent you from getting credit in the future.
The second down side of filing bankruptcy is that the fact that you filed is public information. In some areas, like in upstate New York, your name will be listed, one time, in the local newspaper under listings of people who have filed for bankruptcy protection in the previous week. In the Binghamton, NY daily paper it is listed along with deed transfers and birth notices.
The third downside of filing bankruptcy is that it costs money. The amount it will cost you will depend on certain factors.
1. The first consideration is the cost of the required credit counseling and debtor education certificates. Some credit counseling/debtor education agencies charge $50 per person, some charge $50 per couple, and others charge different amounts.
2. The second consideration is the filing fee, which must be paid to the Bankruptcy Court. The filing fee for chapter 7 is $299 and for chapter 13 is $274. This fee applies to each petition, whether there is only one debtor listed or two. If you are truly poor, it is sometimes possible to get a waiver of the certificate fees and the filing fee. In the Northern District of New York Bankruptcy Court, you have to have as close to 0 income as possible to be granted the waiver.
3. The third consideration is the legal fee charged by your attorney. Attorneys base their fees on the difficulty of the case, the amount of time it will take to file and manage your case in the proper fashion, and the fee related requirements set by the Bankruptcy Court. Chapter 13’s are going to be more expensive than Chapter 7’s, because there is much more time and legal work involved. Many attorneys will allow a portion of the legal fees to be paid by the trustee during the life of the chapter 13 plan, out of the money that you pay into the plan. All legal fees in both Chapter 7 and 13 must be reported to the court and approved by the judge.
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