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Site Loader
Posted on June 23, 2022

Cost versus benefits of filing bankruptcy

When someone gets to the point in their life where it becomes necessary to file for bankruptcy, they obviously don’t have the money to do so. When it comes down to it, the decision becomes a matter of choice. Usually, at the time of filing for bankruptcy, people are at the end of their rope and have nowhere else to turn. Many of them try to do it on their own or use a paralegal to try to save money. While this is completely legal, it is not recommended. Since the bankruptcy code changed in 2005, there are plenty of unknown landmines for the untrained eye to step on. The first is the means test and making sure it is properly filled out. Most people who file for bankruptcy on their own complete the bankruptcy petition in the same way as if they were doing simple bookkeeping at home. Not knowing the ins and outs of the means test could end up forcing a person to file Chapter 13 bankruptcy when they could have qualified to file Chapter 7. Hiring a paralegal to prepare the petition can have its own problems. Most paralegals who work for bankruptcy law firms have a lot of experience preparing petitions. The problem lies in giving legal advice. A paralegal cannot answer any questions or help with the answers while preparing the bankruptcy petition. The person filing for bankruptcy will have to provide everything and choose their own bankruptcy exemptions to boot. Trying to save a few hundred dollars could end up costing a person thousands in the long run.

When someone has made the decision to file for bankruptcy, they first have to recognize the need to do so. Next, they will have to do a cost versus benefit analysis of the bankruptcy process. For someone who has a large amount of unsecured debt, filing for Chapter 7 bankruptcy is king. Filing Chapter 7 will eliminate all unsecured debt, and in some cases, the debtor will emerge from bankruptcy with virtually no debt. It totally depends on the type of debt and the amount of debt on how to do it. Filing Chapter 7 will cost a person about $400 for filing fees and credit counseling and financial management courses. The most expensive part of filing for bankruptcy is hiring a bankruptcy attorney. Typically, a Chapter 7 bankruptcy attorney will vary from law firm to law firm, but when considering the amount of debt that will be canceled in bankruptcy filing, it is really minimal. If someone has $25,000 in credit card debt and the only way they could pay it off is by winning the lottery, paying a few thousand dollars to hire a bankruptcy attorney and file for bankruptcy is truly a bargain. The bankruptcy attorney will also be there to advise their client throughout the entire process, including what to expect at the 341 meeting. If a creditor steps out of line, the person can simply call the attorney to handle it. When someone is buried under a mountain of debt with no way out, filing for bankruptcy should be at the top of their list of options.

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