How to Afford Filing for Bankruptcy in Michigan
Updated: Jun 17, 2020
Filing bankruptcy often comes after a period of expensive medical bills, job loss, economic recession, increasing student loan payments, tax debts or increased credit card debts. Many people are wary of filing bankruptcy because of the fear that bankruptcy will damage their credit score or cause a job loss. For many, there comes a point where the increased debt payments and creditor actions like garnishment or account seizures is too much to handle. At that point, bankruptcy is a good option to achieve a fresh start. When finances are already so tight, many wonder how they can afford a bankruptcy attorney or even to file bankruptcy.
How Much Does It Cost to File Bankruptcy in Michigan?
Like many court actions, bankruptcy generally requires initial court filing fees. The filing fees currently are similar for Chapter 7 and Chapter 13 cases. These fees are charged to every filer, whether or not you hire an attorney to represent you. For Chapter 7 liquidation cases, the filing fee is $335, including a $245 initial filing fee, $75 administrative fee, and $15 trustee surcharge. The Chapter 13 filing fee is currently $310, including a $235 initial filing fee and a $75 administrative fee. A Chapter 11 fee is $1,717 for the Easter District of Michigan and applies when a debtor files a small business bankruptcy reorganization.
For debtors in severe distress, the court offers debtors with an ability to pay the fee in installments or possibly to waive the fee. There are specific standards that a debtor must satisfy before the court will approve a fee-waiver or installment agreement. An attorney can help a debtor understand whether they qualify for these fee modifications at the time of filing based on the debtor’s petition information. For those debtors who feel the initial fee is a barrier to filing bankruptcy, consider this alternative to help achieve a fresh start.
Other Chapter 7 and Chapter 13 Fees in Michigan
Other fees may apply depending on the situation. For example, if a debtor needs to re-open a case in the future, an additional $260 case reopening fee applies for both Chapter 7. A Chapter 13 reopening fee is $235. Another common scenario is a motion to convert a case from Chapter 13 to Chapter 7. This occurs when a Chapter 13 case cannot be completed, but a debtor can liquidate instead of paying off the remaining debts.
Credit Counseling Course Fees
Chapter 7 and Chapter 13 bankruptcy require a debtor to complete credit counseling courses. In many cases, there are non-profit organizations that will charge a nominal fee to complete the course. These courses can be completed online. The fee may be as low as $20 and there may be a wide range depending on the company. Debtors must ensure that the company is certified so the completion of the course will be accepted by the bankruptcy court.
Affording a Michigan Bankruptcy Attorney to File Your Bankruptcy
With the fear of creditor’s garnishing wages and repossessing a car or seizing other property, it is no wonder that debtors who conclude that bankruptcy is the only way out of increasing debts want to file as soon as possible. For these debtors, paying an attorney fee may seem impossible especially when the average Chapter 7 attorney fee is $1,500 and Chapter 13 attorney fees can range from $2,500 to $5,000 or more, with an average of $3,500. When possible, debtors may be able to save for an attorney fee by stopping creditor payments to pay for the bankruptcy or other necessary living expenses. Speaking with an attorney about Chapter 7 generally helps a debtor understand that the bankruptcy code provides for exemptions that allow a debtor to keep certain property or amounts of property after bankruptcy.
Other debtors wonder why attorneys in Chapter 7 cases want a fee paid upfront in cash versus a “no money down” Chapter 13 case. The difference between the fees relates to how the bankruptcy code treats debts, including debts related to attorney fees. If a debtor pays an attorney with a credit card or other promise to pay prior to filing bankruptcy, that debt would be dischargeable and the attorney might not collect the fee. For Chapter 13, bankruptcy administrative expenses are a priority debt that must be paid as part of the bankruptcy repayment plan. Administrative expenses include the bankruptcy attorney fees, so the debtor’s attorney can be paid during the life of the Chapter 13 plan.
Hiring the Right Detroit Bankruptcy Attorney to File Bankruptcy
Hiring an attorney to file a bankruptcy requires hiring an attorney who has the skill to handle your case but will not overcharge you. Some attorneys charge more than $2,000 for a Chapter 7 bankruptcy, and this is generally high when considering that a Chapter 7 case usually involves a “no-asset” case where a debtor expects to keep all or most assets, or is willing to give up assets like a home that the debtor cannot afford and does not want to save because there is no equity. Expensive cases may be reserved for business bankruptcies that involve a lot of assets and the owner cannot preserve the business.
For other Chapter 7 cases, paying $750 to $1,000 is reasonable where no litigation is expected and the debtor has not conveyed property to friend or family to thwart debt collector efforts. Chapter 7 bankruptcy generally does not require court appearances so a debtor’s attorney will not spend hours preparing or litigating in court.
Chapter 13 bankruptcy involves more work for attorneys and merits the higher fees. Individuals considering Chapter 13 bankruptcy should understand what services an attorney will provide for the fee, whether it is fixed or flat, or hourly. Some attorneys may charge additional fees if an unexpected event occurs or if the debtor is not totally forthcoming in their information, resulting in additional work for the attorney. Attorneys should be able to quote a fee in advance of the bankruptcy filing and stand by the fee. The fees are disclosed to the court and approved, so while fees may be different, a court could challenge a fee that seems unconscionable.
Is There a Difference in the Eastern vs Western District of Michigan Bankruptcy Court?
Filing a bankruptcy in Michigan is generally the same regardless of where you live. You must qualify to file in your state under the Bankruptcy Code, which may impact the availability and value of exemptions under state law. Not all states allow a debtor to use bankruptcy exemptions under state law. Michigan allows bankruptcy exemptions under state law, and Michigan individual debtors can choose these exemptions instead of the federal exemptions.
Whether you must file bankruptcy in the Eastern or Western District of Michigan Bankruptcy Court depends on where you live. The west side of the state and upper peninsula file in the Western District of Michigan Bankruptcy Court including Grand Rapids, Marquette, Kalamazoo, Traverse City and Lansing. The Eastern District of Michigan Bankruptcy Court covers the eastern, lower peninsula with courts in Detroit, Flint and Bay City.
Hire an Affordable Bankruptcy Lawyer Near You
If you are considering filing bankruptcy in Michigan, either in the Eastern District Bankruptcy Court or Western District of Michigan Bankruptcy Court, contact Michigan bankruptcy attorney Andrew Steiger for a free consultation. He can discuss your financial situation, and options for resolving your debts including bankruptcy or discuss non-bankruptcy options. He is also an experienced tax attorney who can help you with any tax filing or resolution issues you may be facing. Contact him at (248) 259-6367 or email at firstname.lastname@example.org.