When you file a Chapter 7 bankruptcy case in Detroit or anywhere else in the US, you will be required to pay a filing fee to the United States Bankruptcy Court.
This is no different than the filing fee requirement in place for nearly any legal proceeding, Federal or within the State of Michigan’s own court system. Courts require funding to function, and these fees enable courts to conduct business even while other government offices shut down during, say, a global pandemic.
While it is possible to have the Chapter 7 bankruptcy filing fee waived in the right circumstances, it is a misconception to believe that it can be easily or routinely waived just because you request it.
Chapter 7 Filing Fee Waiver: Do You Really Deserve It?
The waiver of a Chapter 7 bankruptcy filing fee must be requested with the filing of an Application, a form of motion within the bankruptcy process.
The Chapter 7 filing fee waiver Application is an Official Bankruptcy Form, in fact, which requires that you provide specific information to the Court to prove that you are deserving of a free Chapter 7 proceeding.
The Filing Fee Waiver Application requests the following information from you:
- The size of your family;
- Your entire family’s monthly average income (with specific calculation);
- Whether or not you receive any non-cash government assistance;
- Whether you expect your family’s average monthly income to increase in the next 6 months;
- A written explanation as to why you believe you will be unable to pay the Chapter 7 filing fee within 120 days;
- An estimation of your monthly average expenses;
- Whether these expenses cover anyone not included in your “family”;
- Whether anyone pays these expenses other than you;
- Whether you expect your expenses to increase or decrease in the next 6 months;
- The amount of cash that you have;
- Whether you have an income tax refund pending or recently received a large income tax refund;
- The bank accounts and balances, as well as other money deposits, that you have;
- The location and value of your home and other real estate;
- The value and description of your vehicles;
- The value of any other assets that you own;
- Any money or property due to you from anyone else;
- Whether or not you paid a bankruptcy lawyer or anyone else to assist you with your case;
- Whether you promised to pay someone for bankruptcy services;
- Whether anyone paid someone on your behalf for bankruptcy services;
- Whether you have previously filed for bankruptcy within the last 8 years.
In short, the Bankruptcy Court wants to know whether you are deserving of this further form of financial relief. (Bear in mind that merely filing for Chapter 7 to begin with is already a request that the US government provide you with enormous financial benefit to begin with.)
So are you deserving?
In the vast majority of cases, you are probably not, in the eyes of, at least, the Eastern District of Michigan US Bankruptcy Court.
It is important to remember that, although a Federal legal process, “all bankruptcy is local,” as bankruptcy attorneys are fond of saying. That is, no matter what the Official Form Application for Chapter 7 bankruptcy filing fee waiver says or seems to suggest, our “local” bankruptcy judges here in Detroit, Flint, Bay City, and Ann Arbor are very reluctant to approve these requests.
Eastern District of Michigan bankruptcy judges will review your Application for Fee Waiver in the privacy of their chambers—but they also may schedule a hearing on the matter for which you will need to take time away from work, pay for travel (gas is not cheap as of this writing!) and pay for parking in downtown Detroit or elsewhere. (How much was your time worth again relative to the amount of the filing fee?)
Once you stand at the podium before the judge, you are very likely to be asked how much you paid your bankruptcy attorney and whether or not you have an income tax refund pending by which you may be able to pay your filing fee sometime in the near future.
If you paid your attorney an attorney fee in excess of $1,500 for a routine Chapter 7 case or are expecting a $5,000 income tax refund next month, odds are good that your Application will be denied with the bang of a gavel on the spot.
You weren’t hard up enough that you couldn’t pay a competent professional attorney to file your case for you, you aren’t hard up enough to have your filing fee waived. This is the Court’s prevailing logic. Your judge must be convinced that you are unable to pay the filing fee (presently $338.00) in monthly installments.
As you can see, whether your filing fee will be waived is entirely up to the discretion of the bankruptcy judge assigned to your case. Your judge will look at what is called the “totality of circumstances” or your entire financial picture, to determine if your application to waive the filing fee should be granted or denied.
One major factor that the judge will consider to be eligible for a fee waiver is whether your gross household income for your household size is under 150% of the Poverty Guidelines for the United States.
Who Doesn’t Want Your Chapter 7 Bankruptcy Filing Fee Waived?
Who doesn’t want your Chapter 7 filing fee waived? The Court, first and foremost.
As noted above, the one and only reason why the Federal Bankruptcy Court system did not shut down during the COVID pandemic along with other US government offices and functions is that the Court system is financially “self-sustaining.” That is, it pays for itself.
With filing fees.
Chapter 7 and Chapter 13 case and motion and other filing fees fund the Court’s operation. Thus, the Court is loathe to grant your request just so that you can make your monthly installment payment on your high-interest car loan. (Or whatever.)
If you are not in such straits that you are filing your case with the assistance of free legal aid, the odds are good that the Court will not have a great deal of sympathy for your cause.
Beyond the Court, however, who else doesn’t want your Chapter 7 filing fee waived?
The Chapter 7 Trustee.
One of the primary internal expenses of the US Bankruptcy Court paid with your Chapter 7 filing fee is the statutory fee of the Chapter 7 Trustee assigned to your case.
While Chapter 7 Trustees are also compensated for their services with a percentage of the funds that they generate for creditors through the seizure and liquidation of debtors’ assets, the majority of Chapter 7 bankruptcy cases do not actually result in any such liquidation.
Thus, for most of the Chapter 7 cases filed, the only compensation received by the Chapter 7 Trustees for their trouble is the $60 flat fee paid to them from your filing fee.
And they want that $60.
If you file an Application requesting waiver of your filing fee, the Chapter 7 Trustee assigned to your case may well object to it—automatically triggering the docketing of a hearing that may eat up at least half of one of your valuable work-days.
At the very least, it will add an unnecessary layer of questioning to those already to be posed to you by the Chapter 7 Trustee at your 341 Meeting of Creditors hearing. At least one Detroit Chapter 7 Trustee who shall remain nameless will grill you very aggressively about your intent and your entitlement to a fee waiver.
You will not enjoy this additional questioning at what could have been a 5-minute 341 Meeting.
If the Chapter 7 Trustee objects to your fee waiver Application, it is highly likely that your judge will be sympathetic—to the Trustee.
Alternative to Chapter 7 Bankruptcy Fee Waiver Requests
So, if you’ve got just enough money to pay for your bankruptcy attorney but not the filing fee, what’s the alternative?
The first alternative is to wait to file until you have all of the necessary funds.
However, this is not always possible. You may have a creditor suing you, garnishing your paycheck, or engaging in other aggressive collections activity that needs to stop immediately. Waiting to file your case is not an ideal option.
The other alternative is to file not an Application for full waiver of your Chapter 7 filing fee but, instead, an Application requesting that you be allowed to pay your filing fee in 1-4 installments over the 60 or so days following the filing of your case.
In contrast to the Application for Waiver, Installment Fee Applications are indeed routinely granted by the Bankruptcy Courts in Michigan.
These Applications are, in fact, granted without explanation or hesitation.
Judges in the Eastern District of Michigan Bankruptcy Court “rubber-stamp” filing fee installment requests as a matter of course. This approval means that you will be allowed to pay the $338 Chapter 7 Bankruptcy filing fee in up to 4 installment payments, as your paychecks or funds roll in, directly to the Bankruptcy Court Clerk via money order—without any need to travel to the Court.
Of course, if you miss an installment, you’ll be summoned for a hearing to explain to your Judge why it is that your Chapter 7 case shouldn’t be dismissed, if it is not dismissed outright.
Payment of the Chapter 7 bankruptcy filing fee in installments does, therefore, add a separate layer of complexity and calendaring/scheduling responsibility to your bankruptcy case.
Chapter 7 Filing Fee Waiver: The Bottom Line
The bottom line with regard to the waiver of Chapter 7 bankruptcy filing fees in Detroit is that it’s best not to presume it will work.
Instead, if you are considering filing for Chapter 7 bankruptcy in southeast Michigan, contact an experienced Detroit bankruptcy attorney who can tell you what is and what is not realistically possible in your bankruptcy process—and what the alternatives may be.
Attorney Walter Metzen is a Board Certified Bankruptcy Expert who has successfully assisted thousands of Chapter 7 and Chapter 13 bankruptcy clients in Metro Detroit for over 30 years.
If you want to know more about Chapter 7 bankruptcy, contact us now to schedule your free consultation.