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Reducing the cost of a Chapter 7 filing

On Behalf of | Nov 14, 2022 | Bankruptcy |

For people in Connecticut who are struggling to keep up with bills or who can’t afford to pay them at all, bankruptcy might provide relief. It’s not an easy decision, and one common irony in the situation is that many people struggle to afford to pay for their bankruptcy. In many cases, debts have been building up for years, often all but unnoticed as people go through their days and try to make ends meet. By the time you realize you need bankruptcy protection, all of your income may be dedicated to paying for rent or mortgage payments, car payments, other necessaries and debt service.

Filing options for individuals

Generally speaking, there are two types of bankruptcy open to individuals. These are Chapter 7 and Chapter 13. Chapter 13 bankruptcy, also called wage-earners bankruptcy, involves restructuring debt and is designed for people who have a steady income they can use to pay down debts over a period of three to five years. Chapter 7 bankruptcy, also called liquidation bankruptcy, involves liquidated unprotected assets and discharging debts in a process that usually takes around six months.

Options for low-cost Chapter 7 bankruptcy

The fees associated with filing for Chapter 7 bankruptcy include filing fees, administrative fees, a trustee surcharge and attorneys’ fees if an attorney is hired to handle the case. The filing fees can be waived though, in situations where the filer’s household income is lower than 150% of the federally-established poverty level. There are also fees associated with two required credit counseling courses. Those fees are generally less than $50 each, and they may be waived as well depending on the circumstances. Many attorneys offer free consultations to discuss the situation and payment options to make filing Chapter 7 affordable.

What happens when you file Chapter 7?

When a person files for bankruptcy, a legal automatic stay immediately applies to put a hold on all collections actions. During the process, the filer’s assets are categorized as exempt or non-exempt. Exempt assets are not subject to liquidation and typically include means of transportation, tools needed for work, and other assets. In around 90% of cases, individuals who file for bankruptcy keep their homes. It is not a small decision, but filing for bankruptcy protection can relieve stress and lead to a fresh financial start.

photo of attorney R. Richard Croce