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How do legal fees for Chapter 7 and Chapter 13 differ?

Bankruptcy fees differ in amounts and payment schedules

The cost of filing under Chapter 7 or Chapter 13 in U.S. Bankruptcy Court is about the same, but attorney fees differ significantly based on the amount of work required for each type of case.

In both instances, debtors gather a large number of documents that their attorneys and they use to compile their cases. Unless they are representing themselves in court, their lawyers provide legal guidance, file the bankruptcy petitions and represent the debtor during their court hearings.

However, a Chapter 13 action requires more legal work and attorney time in court. In addition, legal fees differ considerably between jurisdictions, depending on the prevailing rates in a given state.

According to the United States Courts, a fee of $306 is charged to file Chapter 7, the most common form of personal bankruptcy. The court fee for Chapter 13 is $281. Generally, lawyers' fees for a Chapter 7 case range from $1,000 to $2,500, in addition to court costs.

Because Chapter 13 cases, in which the debtor must pay creditors through a court-ordered repayment plan, are more complicated than Chapter 7, the attorney fees are higher. They can typically range from $2,200 to $3,200 during the three to five years that the case is active.

Payment details

In Chapter 7 bankruptcy, attorneys often offer their clients a payment plan. It typically includes one payment to retain the lawyer and several future installments to be made before the case is filed. Lawyers expect their services to be paid in full before a Chapter 7 case is filed because any fee that is owed to them could be covered by the bankruptcy. If that happens, they have no way to collect their fees.

Payments for Chapter 13 legal work are paid in the opposite way. Most attorneys don't require full payment before filing the case because they frequently include most of their fees in the debtor's repayment plan. As a result, the attorney is paid through the plan along with other creditors. In some cases, only the $281 court fee to file the case must be paid in advance.

Some attorneys will expect their clients to pay Chapter 7 fees during a set period so the case can be filed within the foreseeable future. Others, noting their bankruptcy clients' limited finances, may allow a flexible schedule according to when the debtor is able to pay. However, the attorney may charge more for this convenience.

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