By Walter Metzen
Fear of the cost of filing for Chapter 7 or Chapter 13 bankruptcy in Metro Detroit should not be a barrier to seeking professional legal advice about the process.
It is true that retaining an experienced bankruptcy attorney comes with a certain cost.
Likewise, it is true that filing papers with a court—any court—will usually carry some level of filing fee. Filing a bankruptcy case is no different in this respect.
Additionally, there are certain additional costs—discussed below—in the bankruptcy process. (None too terrible, usually, but they are nevertheless worth knowing about in advance.)
Regardless of any of that, however, if you are considering filing for Chapter 7 or Chapter 13 bankruptcy in southeastern Michigan, you should neither avoid the opportunity to learn more from a bankruptcy lawyer nor should you presume that you cannot afford to work with a bankruptcy lawyer.
You should not fail to seek freedom from debt, and you should also not attempt to seek that freedom without proper legal advice, in other words.
Nor should you seek the legal assistance of the lawyer who simply charges less than everyone else, either.
This article will explain the costs involved in the Chapter 7 and Chapter 13 bankruptcy process. It will also clarify the benefit of shopping for experience and not simply for price.
First, what are those costs?
Michigan Bankruptcy Cost #1: Filing and Other Fees
The Chapter 7 and Chapter 13 bankruptcy process in Michigan and elsewhere carries with it a number of different governmentally imposed fees.
You will encounter the first before you even file the case.
Prior to filing either a Chapter 7 or Chapter 13 bankruptcy, you must take a pre-filing, online “credit counseling” course required by the US Bankruptcy Code.
Depending upon which course-provider you select, you can expect to be required to pay from $10-$30 for this unhelpful, uninformative, and outright useless expenditure of your time.
The course must be completed, despite its deeply pointless nature, before you can file your bankruptcy case.
The filing fee for the actual case will differ depending upon whether you are filing for Chapter 7 or Chapter 13 bankruptcy.
As of this writing, the filing fee for a Chapter 7 bankruptcy case is $338.00.
The filing fee for a Chapter 13 bankruptcy is $313.00.
Although, in theory, a motion can be filed to waive these filing fees, they are generally denied if you are paying for an attorney to represent you. If you are filing your bankruptcy case with the assistance of a pro bono legal aid organization, a waiver is sometimes possible.
After you file your case, you will be required to take post-filing “debtor education” course online by a certain deadline or risk dismissal of the case.
Although this post-filing course is almost as useful as the pre-filing course, it also carries a provider-dependent cost in the general vicinity of $35.00, typically.
Filing motions, converting your case from one Chapter to another, and a variety of other actions within the bankruptcy case itself will also require the payment of filing-fees.
Michigan Bankruptcy Cost #2: Attorney’s Fees
It is true that you can avoid paying attorney’s fees to a bankruptcy lawyer if you attempt to file your Chapter 7 or Chapter 13 yourself or if you utilize some self-titled “bankruptcy petition preparer.”
First, any non-lawyer attempting to charge you more than $100 for assisting you with the completion of the required forms is doing so in violation of Federal law.
Any non-lawyer who assists you and then leaves his or her name off of the petition form is in violation of Federal law.
If they tell you to tell the Bankruptcy Trustee that your “friend” helped you with the paperwork rather than disclosing their identity, honestly, exercise some judgment in this regard. (This does happen.)
The Federal court system heavily scrutinizes such individuals and has posted this informational flyer about them.
All of that said, you would be surprised how affordable most bankruptcy lawyers can be. This is particularly true with regard to the amount of debt that you can discharge in a Chapter 7 bankruptcy (a limitless amount).
That said, attorneys in the Detroit area will differ in terms of the amount that they charge prior to the filing of a bankruptcy and in terms of the amount that they charge.
They will also differ in terms of the hourly rate that they are allowed by the Bankruptcy Court to charge. This is dependent upon the experience of the attorney in the field.
It is also dependent upon the efforts that the attorney has made to maintain his or her education in the bankruptcy field on a continuing basis.
It is also depending upon whether or not the attorney is what is known as a Board Certified Bankruptcy Expert.
This particular credential requires the passing of a difficult written test. It also requires that the bankruptcy lawyer have had a certain number of years in practice, a certain number of Chapter 7 and Chapter 13 cases filed and discharged by Order of the bankruptcy Judge, and a certain minimum number of “adversary proceeding” (bankruptcy litigation matters) docketed.
It is a difficult credential to obtain. Only those who are Board Certified are allowed by the Michigan Bar Association to advertise themselves as a “Bankruptcy Expert.”
Attorney Walter Metzen is a Board Certified Bankruptcy Expert, and his hourly rate, therefore, will be higher than that of a young lawyer straight out of law school who has filed, maybe, one or two Chapter 7 cases only.
To that extent, you get what you pay for and should not shy away from an hourly rate that is, on paper, higher than someone else’s.
That said, most attorneys in the Detroit area charge a “flat fee” for a Chapter 7 bankruptcy. It will be higher or lower depending upon the rate of the lawyer.
It is easy to compare and contrast flat fees. Again, however, you are best served shopping for experience and service and not just price.
Does your prospective attorney know how to handle a bankruptcy case? Has he or she ever managed one before?
Even if he or she has managed thousands—does he or she return phone-calls on a timely basis? Who in the office will actually handle the work? The attorney or a non-attorney paralegal or clerk? Who will appear in court for you? The attorney or an “appearance attorney” you’ve never met who’s been paid a few bucks to show up instead?
These are questions you should ask at your initial consultation.
Attorneys in Detroit generally (although not always) charge according to their hourly rate for Chapter 13 bankruptcies.
Most of the attorney’s fees in a Chapter 13 will actually be paid after you file and through your Chapter 13 Plan as if your attorney were one of your creditors.
A Chapter 13 is a 3-5-year process that can cost $3,500 or more in terms of attorney’s fees—but you will rarely pay much up front.
The question will be whether you pay a retainer of $500-$1,000 (sometimes more, depending on the complexity of your case) prior to filing or not.
The Cost of Filing Bankruptcy: The Bottom Line
As noted above, the bottom line with regard to the cost of filing for bankruptcy lies not in the amount you pay up front, out of pocket, but in how much you don’t have to pay to creditors afterward.
You will want to shop for price, yes, when choosing among attorneys.
However, shopping for price alone is no guarantee of competence, experience, or customer service. If the first question you ask a prospective attorney over the phone is, “How much do you charge?” you will be selling both yourself and the attorney short.
Attorney Walter Metzen has successfully assisted thousands of Detroit-area Chapter 7 and 13 clients for over 28 years.
To schedule your free consultation and to discuss the costs and other elements of the bankruptcy process, contact us now.