Free Bankruptcy Filing
Re-printed With Permission Original Article Written By: Beth Myers
Can a person file bankruptcy for free? The answer may surprise you.
We will explore this subject in detail and show you what you can do to get your bankruptcy for free, or at least, close to free. Many web searches are done for how to file bankruptcy for free and that is to be expected, given that filing bankruptcy implies that you are out of money.
To be upfront about it, there are no lawyers or bankruptcy preparers offering their bankruptcy services for free and there is a reason for this. In spite of that, it is possible to get your bankruptcy for free or close to free.
A lot of services are provided on the internet for free, or so it would seem, so why not free bankruptcy filing? Businesses have to make money to stay alive and for some, that money comes from the advertizing they display next to the free thing they are giving you. For others, you have to pay a membership fee.
Businesses that give away their product for free while relying solely on advertizing revenues, have to have millions of users for the ad income to be enough. If you have a free Gmail account or can use Facebook for free, it is because those companies have hundreds of millions of users clicking on millions of ads.
On the other hand, bankruptcy lawyers deal with as few as 5 to 10 new bankruptcy clients every month and they have to get paid. In fact, it is because of their very low volume that they charge more than $1,400 per chapter 7 bankruptcy filing, in addition to the court filing fee, which is about $300. So, the real cost of using a bankruptcy lawyer for chapter 7 bankruptcy filing is upward of $1,700.
In contrast, the high volume full-service bankruptcy preparation companies such as USA Bankruptcy Associates, can afford to charge a lot less than bankruptcy lawyers simply because of their higher volume. They prepare the same bankruptcy as the attorneys, so their cost is comparable but it is the higher volumes that keep their fee at about 1/10th that of lawyers.
So how do you go about getting a free bankruptcy filing? There isn't just one thing you have to do to get your bankruptcy for free, but rather, a combination of several things. For starters, if you want a free bankruptcy, then you cannot hire a bankruptcy attorney. If you are filing a personal bankruptcy, hiring an attorney could possibly be a mistake, even if you can manage to come up with their fees. We will talk more about this later but first, let us look at the pathways to a free bankruptcy filing.
Let us look at each of the ways to file bankruptcy and see which ones give you a path to free bankruptcy.
- Do-It-Yourself bankruptcy forms.
- Full-Service bankruptcy preparation services.
- Bankruptcy software
- Bankruptcy lawyers.
There are two costs connected to filing chapter 7 or chapter 13 bankruptcy and they are, (1) the court filing fee and (2) the attorney or bankruptcy preparer fee.
As we said earlier, there are no chapter 7 bankruptcy lawyers or chapter 7 bankruptcy preparers that do not need to feed their families and hence, charge for their bankruptcy preparation services. So when we talk about getting a free bankruptcy filing, we mean that in spite of paying the chapter 7 bankruptcy preparer, you will end up with the same money in your pocket as if you did your bankruptcy by yourself without hiring them.
Do-It-Yourself with Bankruptcy Forms
With that said, let us look at the first option you have for preparing your chapter 7 bankruptcy and that is, with blank forms that you can download from the court web sites. Handling your own bankruptcy with downloaded forms is the most expensive way to file your bankruptcy and here is why.
Let us say that you have $50,000 of debt that you want to get rid of, and let us say that this debt breaks down as follows:
- $30,000 Credit card debt
- $12,000 Secured car Loans
- $8,000 Other secured debts
If you do your chapter 7 bankruptcy by yourself, you will discharge all of the $30,000 in credit card debt. You will most likely reaffirm the $12,000 in auto loans in order to keep the cars, and you will most likely reaffirm the $8,000 in other secured debts, in order to keep the collateral such as financed furniture and financed appliances. Most financed furniture and appliance purchases are secured with the merchandise, so usually, if you want to keep the furniture and appliances, you will reaffirm the underlying secured debt, in this example, $8,000.
So after filing bankruptcy, you end up with the following costs that you have already paid or will pay.
- $299 Court filing fee
- $0 Zero in lawyer fees
- $12,000 In reaffirmed auto loans
- $8,000 in other reaffirmed loans
- For a total of $20,299.00
The average debtor filing a do-it-yourself bankruptcy without help, will think of the court fee of $299 as their only cost because that is what they had to pay upfront, in order to file bankruptcy. They will not think of the $20,000 in reaffirmed secured debts as a cost.
Downloaded blank forms may be free, but in the end you pay more in un-discharged debts. Let us compare this to using bankruptcy software.
Free Bankruptcy With Software
First of all, except for GuaranteedBankruptcy.com, all of the other web sites claiming to sell bankruptcy software do not sell bankruptcy software. They sell nothing more than the same bankruptcy forms that you can download from the court web site for free. They assume that by labeling it as software, they will find enough stupid people who will pay for something they can get for free and unfortunately, they are right. In any case, let us assume that you ignore our advice and use the so called bankruptcy software. Here is the breakdown.
- $299 - Court filing fee
- $89 - In bankruptcy software cost
- $12,000 - In reaffirmed auto loans
- $8,000 - in other reaffirmed loans
- For a total of $20,388.00
The average debtor using bankruptcy software will only see the court fee of $299 and the bankruptcy software cost of $89 as their only cost because that is what they had to pay upfront in order to file bankruptcy. They will not think of the $20,000 in reaffirmed secured debts as a cost.
Free Bankruptcy with Lawyers
As we said earlier, there is no pathway to a free bankruptcy if you hire a lawyer. Here is the breakdown.
- $299 - Court filing fee
- $1,400 - Lawyer fees
- $12,000 - In reaffirmed auto loans
- $8,000 - in other reaffirmed loans
- For a total of $21,699.00
With a lawyer, the minimum you will pay upfront is $1,700 and there is no way to come close to a free bankruptcy filing.
Free Bankruptcy with Full-Service Bankruptcy Preparation Service Companies
The best way to prepare your bankruptcy is with a full-service bankruptcy preparation company. It also happens to be the only way to get a free bankruptcy filing with professional help. There are several good full-service bankruptcy preparation companies, but the best of them is Miller Bankruptcy. Regardless of which bankruptcy preparer you use, here is the breakdown.
- $0 to $299 - Court filing fee
- $0 to $250 - Bankruptcy preparer fees (see details below)
- $0 to $6,000 - Reaffirmed auto loans
- $0 - Other reaffirmed loans
- For a total of $0 to $6,549.00
$0 Court Filing Fee - All the full-service bankruptcy preparation services listed below can help you get the court filing fee waived if you earn low income. If you hire an attorney, on the other hand, the court will not waive the court filing fee because in their view, if you can afford the $1,400 attorney fee, you can afford the $299 court filing fee. So right off the bat you are stuck with the court filing fee.
$0 Bankruptcy preparer fees - If you use a full-service bankruptcy preparation services, and you a have one good credit card, you can charge the preparer fee on the credit card and then list the card in your bankruptcy and thus, discharging it. The means that you can indeed get a free bankruptcy filing.
If you can do this for the full-service bankruptcy preparation services fee, why can't you do it for the lawyer fees? The answer is that most bankruptcy lawyers will not allow you to charge their fee to a credit card. Also, credit card companies will not allow the court to discharge the attorney fee that is charged to your credit card. This is because, (1) it is too big and looks like you are trying to rip-off the card company, and (2) because it will show on their system as attorney fees. In contrast, the typical full-service bankruptcy preparation services fee of about $250 is very low and looks like any other small charge on your card, and will not show up as legal fees.
$0 to $6,000 - Reaffirmed auto loans - Generally, auto loans are reaffirmed at full debt, which means that if you owe $12,000 on your car and want to keep the car, you have to reaffirm the $12,000, thus, not being able to discharge this debts.
However there are exceptions to this. These exceptions are under bankruptcy laws known as cram down and tool of the trade. Under these specials bankruptcy laws, it is possible in many cases to discharge auto loan while keeping the auto. Miller Bankruptcy has a marvelous resource they call The labyrinth that describes in detail, how to use these special bankruptcy laws to get out of paying anything for your car and for most other things, and this is one of the reasons we rate Miller Bankruptcy the best bankruptcy choice for chapter 7 bankruptcy filing. Being able to do this is one big step beyond merely getting a free bankruptcy filing. It keeps as much as $12,000 in your pocket that you would otherwise be paying back for your car.
$0 Other Secured loans - Most furniture and appliance loans are secured by the furniture or appliance, and for most people, if you want to keep the furniture or appliance, you have to reaffirm to repay the debt. What most people do not know and what you will not learn from free bankruptcy software, is that you can almost always convert that secured debt to an unsecured debt and then discharge the debt, while keeping the furniture or appliance. This comes under a set of special bankruptcy laws called lien avoidance. Miller Bankruptcy covers the details of how to use this law to erase the debt and keep the property debt free. The labyrinth also covers a special sleight-of-hand that can easily be used if the secured debt does not come under the special bankruptcy law.
As you can see, it is possible to file bankruptcy entirely for free. You may have to pay upfront for the bankruptcy preparer but you can discharge it in bankruptcy. More important than that, even if you have to pay a lawyer $1,400, that is nothing compared to whether or not you can get rid of many thousands of dollars in secured debt and still keep the collateral, something that most debtors do not know about.
Here are the most reputable full-service bankruptcy service companies.
- Miller Bankruptcy Group
- Bridgeport American Bankruptcy
- Zmt Bankruptcy
- USA Bankruptcy Associates
- Easy Bk Services
- Debtor Aid
Free Bankruptcy and Wage garnishment
What do free bankruptcy filing and wage garnishment have to do with each other? It depends on if you have a wage garnishment, as do many bankruptcy filers.
If you file bankruptcy by yourself using downloaded forms or using bankruptcy software, you will most likely not know that you can get back some of the money already garnished from your paycheck.
Yes, bankruptcy stops wage garnishment but we are not talking about that. We are talking about actually getting some of the money that has been taken out of your paycheck returned to you. This is possible and there is a technique to accomplish this, and surprisingly, your average bankruptcy lawyer might not know about this. Miller Bankruptcy has developed a procedure to do this and they have included it in their labyrinth.
If you have a wage garnishment and you can get some of the money that they have taken from you back, it could quite substantial, more than enough to pay for your bankruptcy preparation fees.
Our Recommended Chapter 7 Bankruptcy Picks
There are lots of good bankruptcy preparation companies that debtors can choose from but our pick is USA Bankruptcy Associates for online bankruptcy preparation. Here are our reasons for picking this company.
USA Bankruptcy Associates is the oldest bankruptcy preparation site around. They began as a regular attorney support company in California back in 1990 and then branched into the internet starting around 2000. Since then they have prepared more than 30,000 bankruptcies. I like that they have been around for such a long time and were the first to offer real-time online bankruptcy preparation. I also like the positive feedback that I get from readers of the blog who have used USA Bankruptcy Associates.
A close pick is Miller Bankruptcywhich is also a full-service bankruptcy preparation company. I have seen a lot of reviews where Miller Bankruptcy has been picked over USA Bankruptcy Associates but in my opinion, it still comes down to price verses features. Miller Bankruptcy is more expensive and though they have more after-bankruptcy features, I do not know if it justifies the significantly higher price. The Miller Bankruptcy claim to fame is their Labyrinth which they claim can help you hide or block your bankruptcy from the credit bureaus but that is nothing new.
More than ten years ago, USA Bankruptcy Associates pioneered that concept and I recall that it was so successful that many bankruptcy courts began to instruct their clerks to watch out for debtors using this USA Bankruptcy Associates technique. Just about everyone who used the company back then was able to hide their bankruptcy from the credit bureaus. That was until the court clerks began to intervene in what was obviously not their damn business and what was clearly a legitimate loophole in chapter 7 bankruptcy law.
To make a long story short, USA Bankruptcy Associates stopped offering that service and instead, focused on just preparing good bankruptcies and helping people to remove the bankruptcy from the credit bureaus, rather than blocking it from entering the credit report in the first place. While Miller Bankruptcy is a well regarded bankruptcy preparation company, they probably missed the memo on the bankruptcy hiding thing. Or it could simply be that they have found a way around the court clerks. In fact I have it on good authority that they use a better technique than the original one introduced by USA bankruptcy Associates but I am generally skeptical about new and improved things.
My opinion anyway is that if you want to file bankruptcy, use a solid company and for me, that is USA bankruptcy Associates. If they can help you with your credit after bankruptcy, then great, but who wants credit after bankruptcy? Credit was what got you in the mess in the first place so when they offer to help you get back on your credit binge, say thanks but no thanks.
Some of the other companies to consider are Bridgeport American Bankruptcy and Easy Bk services. They too are good full-service companies and you cannot go wrong with them. Stay away from bankruptcy software because there are no bankruptcy software designed for individual consumers. There are web sites claiming to sell bankruptcy software but they do not really sell software. Bankruptcy software is very difficult to develope so what a few sites do is take the same free bankruptcy forms that anyone can get from the court web sites and they repackage and call it software. They usually cost about $49.95 but it is a waste of money since it is the same free forms.
Our Pick:USA Bankruptcy Associates
A lot of people ask us if they can file bankruptcy for free and the answer is yes. It is possible to file bankruptcy for free and we can show you how. Find the article in the left navigation bar.
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