It Now Costs More to File for Bankruptcy

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Many consumers across the country are facing financial difficulties so significant that they may be considering filing for bankruptcy protection from their creditors. However, the cost of doing so has risen significantly in the last few years.

Since the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act by Congress in 2005, the cost of filing for Chapters 7 and 13 bankruptcy—the kinds of protection most commonly sought by consumers—has increased significantly, according to a report from the Orange County Register. The data, which comes from a study by the American Bankruptcy Institute, found that Chapter 7 cases now cost 51 percent more when the consumer has no assets, and 37 percent more when there are assets involved. In addition, the legal fees associated with these cases have risen roughly 30 percent to an average cost of $1,072.

The law was originally passed to make it more difficult for consumers to file for bankruptcy and went into effect in October 2005, the report said. This led to a spike in filings as indebted consumers sought protection ahead of the deadline.Meanwhile, Chapter 13 bankruptcy filings now cost 27 percent more for discharged cases, and 24 percent more for dismissed cases, the report said. Attorney costs for this type of case have risen 24 percent to an average of $2,564.

The main reasons that bankruptcy tends to cost more since the passage of the law is that there is more paperwork required to file, and that adds time to the filing process, which itself adds to the cost of seeking protection, the report said. Further, attorneys, trustees and other court officials now have more obligations throughout the process.

“There is a disconnect between the skill, time and commitment it takes for attorneys to provide debtors with first-rate representation, and compensation that does not always reflect such excellence,” said Lois Lupica of the University of Maine School of Law, who served as principal investigator for the study, according to the newspaper.

Bankruptcy filings increased significantly during the recent recession as millions of Americans fell on hard times and were unable to successfully make ends meet, but have ebbed since it ended, and are believed to have fallen considerably in 2011.


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