How to Pay for Chapter 7
Filing for Chapter 7 bankruptcy can offer a fresh start by wiping out most unsecured debts, such as credit card bills, medical bills, and personal loans. However, the process itself isn't free; you'll need to cover filing fees and attorney costs. If you’re already struggling financially, finding the funds to pay for these costs might seem daunting. One practical strategy to manage these expenses is to stop paying debts that will be included in your bankruptcy and use that money to pay your attorney instead. As the old adage goes:
Quit throwing good money after bad.
Here’s how you can do it:
Understanding Chapter 7 Bankruptcy Costs
Before diving into the strategy, let's break down the typical costs associated with filing for Chapter 7 bankruptcy:
Filing Fees: The court charges a filing fee, which is currently $338. This fee is required to submit your bankruptcy petition.
Attorney Fees: Hiring an experienced bankruptcy attorney can make a significant difference in the outcome of your case. Attorney fees for Chapter 7 bankruptcy can range significantly, depending on the complexity of your case and your location.
Credit Counseling and Debtor Education Courses: You’re required to complete credit counseling before filing and a debtor education course after filing, which can cost between $20 to $100 each.
The Strategy: Stop Paying Dischargeable Debts
When you file for Chapter 7 bankruptcy, most unsecured debts will be discharged, meaning you are no longer legally required to pay them. With this in mind, you can redirect the money you would have used to pay these debts toward your bankruptcy costs. Here's how:
Identify Dischargeable Debts: List all the debts that will be wiped out in bankruptcy. These typically include credit card debts, medical bills, personal loans, payday loans, and utility bills (not including back payments for current services).
Stop Payments: Cease payments on these dischargeable debts. While this might feel uncomfortable, remember that these debts will be erased once you file for Chapter 7. You can use the money you save from not making these payments to cover your attorney fees and filing costs.
Budget for Essential Expenses: Ensure you continue to pay for essential expenses that bankruptcy will not discharge, such as rent or mortgage payments, utilities you need to maintain service, car loans (if you plan to keep the vehicle), and any other secured debts or necessary living expenses.
Step-by-Step Guide to Implement the Strategy
Consult with a Bankruptcy Attorney: Schedule a consultation with an experienced bankruptcy attorney. Pioneer Bankruptcy offers free initial consultations, during which you can discuss your financial situation and learn about the costs involved.
Create a Budget: After consulting with an attorney, create a budget that includes your essential expenses and sets aside money for bankruptcy costs.
Reallocate Funds: Redirect the funds you would have used for paying dischargeable debts toward your bankruptcy costs. Keep track of the money you save each month and ensure it is allocated toward paying your attorney and other bankruptcy-related expenses.
Save for Filing Fees and Courses: Remember to set aside money for the court filing fee and the required credit counseling and debtor education courses.
Important Considerations
Impact on Creditors: Stopping payments on dischargeable debts may result in collection calls or letters. Inform creditors that you plan to file for bankruptcy and provide your attorney’s contact information if necessary.
Timing: Be mindful of the timing when you stop making payments. Consult your attorney to ensure you are not inadvertently jeopardizing your bankruptcy case or causing unnecessary legal issues.
Consultation is Key: Always consult with a bankruptcy attorney before making any financial decisions related to your bankruptcy case. They can provide guidance tailored to your specific situation.
Conclusion
Paying for a Chapter 7 bankruptcy might seem overwhelming, but by stopping payments on debts that will be discharged and reallocating those funds, you can manage the costs more effectively. This strategic approach allows you to prioritize your financial resources, ensuring you can afford the necessary legal assistance to navigate the bankruptcy process. For personalized advice and assistance, consult with an experienced bankruptcy attorney at Pioneer Bankruptcy. They can help you understand your options and guide you through each step of the process.