What Are the Costs Associated with a Bankruptcy Filing?

Interviewer: Now, a lot of people will be concerned because obviously, they're already in a financial bind so is there a huge difference between the cost of filing a Chapter 7 versus a Chapter 13? Is one more expensive than the other?

Because Chapter 13 Bankruptcies Continue for 3 to 5 Years, the Fees Associated with the Filing Are Higher than a Chapter 7

Vance: There is a big difference. There is a reason that the bankruptcy court in this district control how much I could charge for a Chapter 13. Chapter 13 bankruptcies are more expensive to file because I'm linked to it for three to five years.

The Attorney Fees Are Included in the Chapter 13 Payment Plan

Most of my fee in a Chapter 13 is paid off through the Chapter 13 plan. The reason they do that is because it keeps you engaged in their case. As they make their Chapter 13 payments to the Chapter 13 trustee then he pays me part of my fee and it stretches out throughout the whole case.

Chapter 7 bankruptcies are less expensive. But I'll be honest with you; I make more money per hour on a Chapter 7 than I do a Chapter 13 even though the Chapter 13 fee is almost four times more.

You're in the plan for three to five years and there are always details to attend to during those three to five years. You got to manage them and you have to review the plan. Something will always come up in that three to five year period. In a Chapter 7, you're done in five months.

If You File a Chapter 7, You Will Receive Your Discharge Paperwork in 5 Months

From the time the client come in here to see me to get started to the time he or she gets the discharge in Chapter 7 is about a five month process. Now, it's on your credit report, the bankruptcy stays on for seven to 10 years. The average recovery period, though, after a Chapter 7 bankruptcy, the national average is two to three years. That also applies a Chapter 11 bankruptcy and within two years, they're buying new homes.

Short-term Loans with High Interest Rates Are Covered by Bankruptcy

Interviewer: What are some of the protections that bankruptcy affords people that they don't know? For example, there's a huge problem with payday loans right now. I don't know if you still have a big problem with that up in Ohio but would such a thing be covered under bankruptcy?

Vance: Yes. Even though I've had them, I file bankruptcy on them all the time.

Interviewer: That's pretty much like a scare tactic they're trying to use when it fully well is covered under bankruptcy?

Vance: Yes, that is right.