FAQs for Individual Debtors
- Where can I get basic information
- How much does bankruptcy cost?
- Do I need to pay the entire fee up front?
- Can I file without my spouse?
- How long does it take?
- Will this affect my credit score?
- Is information about my bankruptcy case publicly available?
- What if I don’t qualify for a Chapter 7 bankruptcy?
- Why should I declare bankruptcy instead of doing a debt repayment plan outside of bankruptcy?
Where can I get basic information?
The US Bankruptcy Court website has basic information.
Asking this question is a little like asking how much it will cost to fix your car before the mechanic looks at it. So take this answer with that in mind. Also keep in mind that the attorneys’ fees are separate from things such as court filing fees (about $350) and debt counseling fees paid to third parties.
Most simple chapter 7 for individuals with primarily consumer debts and no special issues will run between $1,500 and $3,500 depending on issues such as whether the debtor(s) can assemble the needed documents in one attempt, whether they have debts they want to reaffirm past the bankruptcy case (such as a car loan), and other facts. Things can become a little more complex (and expensive) if the debtors have any questionable recent transactions.
A Chapter 13 case usually costs a little more, since it involves creating a repayment plan that must be approved by the court, in addition to the documents required in a Chapter 7. While every case will be different, the office of the US Trustee has adopted a fee schedule presumed to be reasonable.
Chapter 11 reorganization cases (usually reserved for businesses) typically are more involved and ongoing fees are scrutinized by the US Trustee’s office and the Court for reasonableness before the attorney can be paid for post-petition services.
You have the right to file for bankruptcy without your spouse joining you. In many cases, however, it is not advisable. First, if you file, all of the community property is still property of the bankruptcy estate. Next, your discharge, if you receive one, will act as an injunction against efforts by creditors against you and it will include efforts to reach the community property. In California, however, spouses’ separate property can be held liable for a number of debts incurred by the other, namely debts incurred for basic necessities of life. This has been interpreted to include food, shelter, and medical expenses. So, if you receive a discharge, but your spouse has separate property and the debt relates to necessities of life, your spouse may still be sued even after you receive your discharge.
A Chapter 7 case with no complications can often be finished within about four months of filing. A Chapter 13 repayment plan is not finished until the plan has been performed, and that can take three to five years. A Chapter 11 plan can be completed as quickly as 6 months or can take several years.
Credit reporting is governed in part by the federal Fair Credit Reporting Act. Under section 605(a) of this law (15 USC §1681c), consumer reporting agencies are generally prohibited from including a bankruptcy in a credit report after 10 years. However, this is not substantially different than the timeline permitted to report a negative inference for bad debt outside of bankruptcy – 7 years. And, some lenders may actually be more willing to lend to people who have just been through a bankruptcy, because the debtor has just been discharged of other debts and because the debtor cannot get another discharge for a number of years.
Your petition, schedules and other filed documents are part of your bankruptcy case, and are publicly available to anyone who desires to review court records. Certain information such as your social security number, however, will remain private.
Changes were made to the bankruptcy code in 2005 that limit the number of people who can file for Chapter 7 relief to those whose income when matched to their secured debts does not result in significant monthly disposable income. This is “means test.” If you don’t qualify to file a case under Chapter 7, you may qualify to file bankruptcy under Chapter 13 or Chapter 11, or you may be best served by doing an out of bankruptcy workout. These alternatives typically cost more and take longer, but may achieve your goals nonetheless.
Good question. Sometimes, bankruptcy is not the best alternative. Workouts outside of bankruptcy may be best when much of your debt would be non-dischargeable (such as repayment plans with the IRS), or the automatic stay would not apply to a particular claim such as ongoing alimony payments.