If you’re considering filing for bankruptcy in Tennessee, you are undoubtedly facing significant financial challenges. And, if you are like most people who ultimately file for bankruptcy protection, you may have been struggling with those issues for some time. So, it makes sense that you would be concerned about the costs associated with filing bankruptcy.
Costs of bankruptcy fall into several different categories, which include:
- The required pre-filing credit counseling and pre-discharge financial management course
- Bankruptcy court filing fees
- Trustee fees
- Attorney fees
In rare cases, there may be additional costs associated with a consumer bankruptcy case. For example, if valuation of a significant asset is in dispute, it may be in the bankruptcy petitioners’ best interest to hire an expert appraiser. However, this type of additional expense is rare. In most cases, all expenses associated with bankruptcy fall into one of the 4 categories listed above.
Cost of Required Courses
All consumer bankruptcy petitioners are required to complete credit counseling with an approved provider before filing the bankruptcy petition. The certificate of credit counseling completion must be filed with the bankruptcy petition, and failure to complete credit counseling before filing will typically result in dismissal of the bankruptcy case.
Fortunately, credit counseling can typically be completed quickly and affordably. Most bankruptcy filers are able to complete their credit counseling requirement over the internet or by phone, at a cost of $50 or less. Some providers offer the course for as little as $15.
Similarly, a bankruptcy filer is required to complete an approved financial management course before he or she can be granted a bankruptcy discharge. This course can also typically be completed online, and pricing is generally in the same range as or lower than the credit counseling cost.
Some providers offer a package that includes both the prevailing credit counseling and the pre-discharge debtor education course for as little as $25 total.
Bankruptcy Court Filing Fees
One fixed cost of filing a consumer bankruptcy case is the filing fee payable to the appropriate U.S. Bankruptcy Court. The filing fee for a Chapter 7 bankruptcy case is currently $335. The filing fee for a Chapter 13 case is $310.
In the Eastern District of Tennessee, the Bankruptcy Court allows consumer bankruptcy filers to ask to pay the $335 filing fee over a four-month period of time after filing the bankruptcy case if the person filing does not have the $335 to pay the filing fee on the day of filing. Attorney Heather Banks stated “Judge Bauknight will grant a motion to pay the filing fee in installments so clients can pay the filing fee at $85.00 per month for three months and $80.00 for the fourth month. This allows clients to be protected from their creditors much sooner.”
In cases of extreme hardship, a bankruptcy petitioner may be able to receive a fee waiver. If you do not qualify for fee waiver but are unable to pay the filing fee all at once, you may also be able to request an installment plan.
Tennessee Bankruptcy Trustee Fees
Bankruptcy trustees are paid differently in Chapter 7 cases than in Chapter 13 cases.
In a Chapter 7 case, the bankruptcy trustee receives a portion of the filing fee. The Chapter 7 trustee may receive additional compensation if there are non-exempt assets to be converted for the benefit of creditors. In that case, the bankruptcy trustee receives a percentage-based fee and all assets converted to make partial payments to creditors. The percentage is capped by law, and the cap is tiered based on the value of the assets. However, in the vast majority of Chapter 7 cases, there are no non-exempt assets. That means no assets are converted for the benefit of creditors, and the trustee receives no compensation beyond the small initial administrative fee.
In a Chapter 13 case, the trustee receives a percentage of the creditor payments administered through the bankruptcy. In Knoxville, the Chapter 13 Trustee currently receives a 4.75% fee of all funds she receives as her fee.
Attorney Fees in Bankruptcy
Attorney fees in bankruptcy vary depending on whether you are filing for Chapter 7 or Chapter 13 bankruptcy, the bankruptcy firm you retain, your location, and whether your case involves services outside the ordinary flat fee pricing. During your initial consultation, your bankruptcy attorney will explain exactly what services are included in the flat-rate fee, and what to expect if you need services that fall outside that scope.
In a Chapter 7 case, attorney fees must typically be paid in advance of filing. That’s because the U.S. Bankruptcy Code prohibits taking on additional debt in advance of bankruptcy, and that includes a promise to make future payment to your bankruptcy attorney. For the same reason, you generally cannot pay your Chapter 7 attorney with a credit card.
Bond, Botes & Lawson in Knoxville have been approved to file the bankruptcy without the attorney fees being paid before filing. As attorney Cynthia Lawson explains, “If you are needing to file chapter 7 quickly to stop a lawsuit or garnishment, I will file the bankruptcy and allow a qualified third-party guarantor to pay the attorney fees after the bankruptcy is filed. This allows you to stop the lawsuit or garnishment immediately without having to struggle to come up with attorney fees or filing a chapter 13 when you qualify for a chapter 7.”
However, in a Chapter 13 case, attorney fees may be paid over time, through the three to five year Chapter 13 repayment plan. The U.S. Bankruptcy Court for the Eastern District of Tennessee caps flat-rate attorney fees in a Chapter 13 case at $3,750. However, the fee may be less if the attorney chooses to charge less, the case is not completed, or the case is converted. And, the fee may be higher if services outside the scope of the flat-fee representation are required.
Choosing the Right Bankruptcy Attorney
Though it is natural to be concerned about pricing, particularly if you are having financial difficulties, attorney fees should not be your primary concern in choosing a bankruptcy attorney. While there is some variation in attorney fees, attorney compensation is typically very small in comparison with the amount of debt that you will be clearing in a Chapter 7 case or resolving in a Chapter 13 bankruptcy. Schedule a free consultation with the bankruptcy attorney you are considering, and make sure that you are comfortable working with him or her, and feel you can rely on the attorney’s knowledge and experience.
To schedule a free consultation with an experienced bankruptcy attorney at Bond & Botes, fill out the contact form on this page or call 877-581-3396.
Cynthia T. Lawson is the Managing Partner of the Bond & Botes Law Offices location in Knoxville, Tennessee. She holds a Bachelor of Science from East Tennessee State University, and a Juris Doctorate from University of Memphis, Cecil C. Humphreys School of Law. She currently serves as a Mentor for the Moment in bankruptcy.Read her full bio here.