How Much Does a Bankruptcy Attorney Cost? 6 Factors That Set the Fee

Bankruptcy is one way out of a business drowning in debt, but debtors may hesitate to use it because of legal costs. Prospective clients who look into Chapter 7 or Chapter 13 bankruptcy understandably want to know exactly how much they’ll pay. The price depends on whether you hire a lawyer, and if you do, how much your attorney charges. Costs also depend on which chapter bankruptcy you file under, local guidelines, and complexity of your case. Working with a lawyer generally runs $1,500 to $2,500 for Chapter 7, and $2,500 to $3,500 for Chapter 13. Depending on where you live, and your own situation, total bankruptcy fees usually run about $1,800 to $4,000. In some areas, they may be lower.

Lawyers for Chapter 7 usually want their entire fee upfront, because any fee left unpaid may be discharged. Chapter 13 lawyers may receive most of their payment as part of the debtor’s Chapter 13 plan. Chapter 13 is a slow process with many steps that are relatively complicated for nonlawyers.

Additional concerns for you as a business owner include what type of business entity your business is -- e.g., sole proprietorship, LLC or corporation -- and how many assets and liabilities it has. If the business’s owner/s went through legal steps to create an entity, that entity is not the same as the owner/s. Corporations, LLCs, etc. aren’t their owners or investors - they are corporate entities who should be represented in court by a lawyer. Corporations and partnerships can’t use Chapter 7 to get a discharge. Businesses with debts under $3,424,000 may use Subchapter V, which is designed for them. Congress passed a bill raising the limit to $7,500,000 that awaits signing by the president. But double-check the most current status. Subchapter V offers debtors more than a straight Chapter 11, including no quarterly U.S. Trustee fees. In a traditional Chapter 11, you would be charged at least $250 a quarter.

Business debts, assets you want to keep, your personal creditors, and multiple properties can make filing more time-consuming. Simple cases where the property and creditors are straightforward and business debt is minimal will usually cost less, all other things being equal.

The area where your bankruptcy case takes place may also affect legal fees. You may find prices vary not just from state to state, but even city to city.

The price a bankruptcy lawyer quotes may be subject to adjustment by the court. Your lawyer is required to report to the court all fees you paid them over the past year. If the court decides the fees were excessive, the court can order the lawyer to refund some of them. Chapter 11 or Chapter 13 lawyers usually file detailed fee applications with the court. The judge weighs hours put in on the estate case, the lawyer’s rates, necessity of the work done, complexity, the lawyer’s experience and other factors.

Filing Fees

Lawyers’ fees are just one expense you’ll incur in a bankruptcy case. There are others you’ll want to have in mind when planning for the process. The bankruptcy court charges filing fees, which you’ll pay whether you use a lawyer or file pro se. Under Chapter 7, fees are $338; under Chapter 13, fees are $313. Counseling fees are usually between $0 and $50. You’ll also pay some small fees for credit reports, copying court documents, mailing items to your creditors and possibly buying debtor training courses. With larger numbers of creditors, these costs can add up.

Filing for Chapter 7? If you earn less than 150% of the U.S. poverty guidelines for your family size, you may get your fee waived. You can also ask for your fee to be paid in installments. These concessions generally apply only to Chapter 7 cases, not to Chapter 13 cases. Legal aid societies and law school clinics may help if your income qualifies. Many attorneys offer a free consultation (30-60 minutes) where you can explain your situation and hear what legal options may be open to you.

Individuals can file for bankruptcy without a lawyer, with caveats. As noted above, entities such as corporations, partnerships or LLCs cannot represent themselves in court; they must have a lawyer. You don’t want to miss important deadlines, incorrectly add up or list your assets, or otherwise make a mistake in filing that could have been avoided. In the Central District of California in 2017-2018, of Chapter 7 cases, 55.6% who self-filed received a discharge, while 94.1% of those using lawyers received a discharge. Under Chapter 13, 2.9% of self-filers were discharged, while 69.1% of lawyer users were discharged.

You may hesitate to pay the costs, reasoning that if you were able to pay this much, bankruptcy wouldn’t be necessary. A lawyer’s price is only one consideration. An important job you’ll have is to weigh that against the amount of debt you stand to wipe out, and any non-exempt assets that you might lose. If you have business debt, aren’t sure how your debt compares with your equity, don’t know what legal exemptions you qualify for and are unsure how to properly list your creditors, a consultation may help you sort out the situation.