You’ve been struggling with your finances. You can’t keep up with the bills and your debt is mounting. There’s one way out—bankruptcy. But you need money for the process too! There are fees you have to pay, but you have no cash to spare, and therein lies the problem. Now, how to file for bankruptcy with no money?
What is Bankruptcy?
Bankruptcy is a legal process that a person or company undertakes to get relief from debt. You can hire a bankruptcy attorney to help you, but you also have the option to go through it alone. You need to meet certain requirements and cover the costs as you move forward with the proceedings, which typically last between four and six months.
You can choose from two types of bankruptcy if you’re looking to eliminate all or part of your unsecured debt, stop wage garnishment, debt collections, or the repossession of your assets. These are Chapter 7 and Chapter 13 bankruptcy.
How much do you have to be in debt to file chapter 7? There is no minimum debt amount when filing for bankruptcy under this type. To qualify, though, you need to pass a Chapter 7 Means Test for the court to determine whether or not you have the financial capacity to pay off your debt.
What is a Chapter 7 Bankruptcy?
Under Chapter 7, all your non-exempt assets will be sold and the proceeds will be used to pay off your debts. If your assets are not enough to cover all of your debt, the remaining balance will be discharged. Examples of non-exempt assets include jewelry, expensive clothes, family heirlooms, and valuable collection.
But filing for Chapter 7 bankruptcy doesn’t mean you have to surrender all of your assets. You will be allowed to keep a certain amount of property, also known as exempt property, to help you start over after the bankruptcy. The amount of property you can protect or exempt will depend on the state where you live. Some states require you to refer to state exemptions while others let debtors choose between state and federal law bankruptcy exemptions.
States that allow federal bankruptcy exemptions include:
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- Rhode Island
- Vermont, Washington, and Wisconsin.
Under federal law, here are a few examples of exempt assets you can protect:
- Homestead exemption – $25,150
- Motor vehicle – $4,000
- Jewelry – $1,700
- Personal Property – $13,400
- Business essential items – $2,525
Chapter 7 bankruptcy generally discharges unsecured debts, such as medical bills and credit card debt. However, it doesn’t include child support, alimony, student loans, and homeowner’s association fees, which means you need to pay them even after the bankruptcy ends.
What is a Chapter 13 Bankruptcy?
Under Chapter 13, you can keep your property, provided that you complete a court-approved repayment plan, which may last from three to five years, depending on your income. To be eligible for a Chapter 13 bankruptcy repayment plan, you need to have a regular income. Your secured debt should not exceed $1,257,850 and $419,275 for unsecured debt, as of 2019. These amounts change every three years. Under this type of bankruptcy, secured debt may be reduced while unsecured debt, such as medical debt and unsecured debt, may be discharged after you complete the repayment plan.
How to File for Bankruptcy on Your Own
Yes, you can file for bankruptcy without hiring a lawyer. You can represent yourself, also known as filing “pro se,” as long as you have the time and you’re willing to do some research.
Here’s what you need to do:
- Determine what type of bankruptcy you should file. Should you file a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy? You need to take a Means Test to determine if you’re eligible for Chapter 7 Bankruptcy. You can download the Chapter 7 Means Test Calculation form from the US Courts website.
- Study your state’s exemptions. You may be able to keep some of your assets under bankruptcy law. However, these exemptions vary between states. You need to know your state’s exemptions so that you’ll have an idea of which of your properties you can keep.
- Fill out all necessary bankruptcy forms.
- Undergo pre-bankruptcy credit counseling, which is generally offered by non-profit credit counseling agencies. Through this course, you’ll learn other ways to resolve your financial problems without resorting to filing for bankruptcy.
- If bankruptcy is your best option, take all of the forms you filled out and file them at the bankruptcy court in your area.
- You’ll have to cover the fees associated with the bankruptcy proceedings. Remember, you can submit a request to waive the filing fee or pay it in installments, as long as you are eligible to do so.
- After filing, the court will appoint a bankruptcy trustee for you. The trustee will check the accuracy of the documents you filed and oversee the sale of your non-exempt properties and make sure the proceeds are used to pay off your outstanding debt.
- Meet with the trustee and the creditors. The creditors will ask you how you plan to pay back the money you owe while the trustee may have some questions about the documents you filed and your case in general.
- Take a “debtor education” course where you’ll learn how to manage your finances and avoid the debt trap. Check the U.S. Department of Justice website for a list of approved debtor education providers in your area.
- Wait for the decision of the bankruptcy court. The bankruptcy judge will issue a discharge as soon as possible. It takes about four to six months for a discharge (debtors are released from certain types of debt) to be issued for a Chapter 7 bankruptcy. Meanwhile, a discharge for Chapter 13 bankruptcy is provided after the completion of the repayment plan in three to five years.
Is it Advisable to File for Bankruptcy Without a Lawyer?
Bankruptcy law is complex and making mistakes in your filing or during the proceedings can do you more harm than good. Bankruptcy lawyers exist for a reason and that’s to help people like you during these stressful times of your life.
A bankruptcy lawyer will help you:
- Determine if filing for bankruptcy is your best option
- Identify which type of bankruptcy to file
- Understand bankruptcy laws and how they relate to your situation
- Know which assets you can and can’t keep
- Learn which debts can be discharged
- Fill out the necessary bankruptcy forms
- Assist you throughout the bankruptcy proceedings
How to find a bankruptcy lawyer?
- Ask for recommendations from your friends or relatives who have hired a bankruptcy lawyer in the past. Word of mouth remains one of the best sources when it comes to finding a reliable attorney.
- You should also check online directories for a list of attorneys who specialize in bankruptcy. Get in touch with a few lawyers and arrange an initial consultation.
- During the initial meeting, determine if their rates are within your budget, if they possess the expertise you need, and if you’re comfortable working with them.
Finding the right bankruptcy lawyer is key to filing your bankruptcy case successfully. Check the American Bar Association’s Legal Help or the National Association of Consumer Bankruptcy Attorneys for more information on how to find a bankruptcy lawyer.
What are the Fees for Filing Bankruptcy?
Money is tight for anyone who is filing for bankruptcy, and that’s why it’s crucial to know the costs associated with it. Here are the fees related to filing for bankruptcy as listed by the National Bankruptcy Forum.
- Filing fees
- Chapter 7 Bankruptcy – $335 (Until November 30, 2020)
- Chapter 13 Bankruptcy – $310 (Until November 30, 2020)
Note: By December 1, 2020, the filing fees will increase to:
- Chapter 7 Bankruptcy – $338
- Chapter 13 Bankruptcy – $313
Visit http://www.uscourts.gov for the updated list of bankruptcy fees.
- Credit counseling or financial management course: $20 to $100 (depending on where you file for bankruptcy)
- Lawyer’s Fees
- Chapter 7 With Lawyer – $1,500 to $3,000
- Chapter 13 With Lawyer – $3,000 to $4,000
What if You Can’t Afford to Pay the Filing Fees?
As its name suggests, you have to pay filing fees when you file for bankruptcy. You can choose between two options if you can’t afford to pay the filing fees—have the filing fee waived or request to pay it in installments.
How to Have the Chapter 7 Bankruptcy Filing Fee Waived?
Before you can have the filing fee waived for Chapter 7 bankruptcy, you need to meet the following requirements:
- You’re unable to pay the filing fee even if it’s in installments.
- Your income must be less than 150% of the federal poverty limits applicable to your family size.
If you meet the requirements, you have to fill out the application form to have the Chapter 7 filing fee waived and submit it when you file for bankruptcy. You may or may not be required to appear before the judge to answer questions about your request.
How to Pay the Filing Fees in Installments?
If you’re not eligible to request a filing fee to be waived, you may consider paying it in installments. Download the application form for individuals to pay the filing fee in installment. You have to state that you can only pay the filing fee in installments and suggest a payment schedule. Keep in mind that your proposed schedule for payment must not exceed four installments and your last payment must not exceed 120 days after filing the request.
Can you have the filing fee waived or paid in installments for Chapter 13 bankruptcy?
Can You Have the Filing Fee Waived or Paid in Installments for Chapter 13 Bankruptcy?
No, you can’t. Filers of Chapter 13 bankruptcy are not eligible to have the filing fees waived or paid in installments. Given that this type of bankruptcy requires you to have enough funds to pay your debts in partial or in full, you’re expected to have a budget to cover the filing fees.
What Other Options Do You Have Aside from Filing for Bankruptcy?
What Other Options Do You Have Aside from Filing for Bankruptcy?
- Debt management – With the help of a credit counselor, you’ll come up with a repayment plan, determine how much debt you can pay off, negotiate with creditors, and use the money you have to settle your bills until they’re paid off.
- Debt consolidation – It involves taking out a new loan that you can use to pay off your debts. Simply put, it’s like combining your loans from different creditors into a single debt, with favorable repayment terms.
- Debt settlement – It’s an agreement between you and your creditor, wherein you’ll pay a portion of your debt in one lump sum. In return, the creditor will forgive your remaining balance.
Bankruptcy is a serious ordeal nobody wants to get into, but it could be your only way out of debt if you can no longer make ends meet as you struggle to pay off your debts. With money quite tight, you may not have extra cash to pay the filing fee. How to file for bankruptcy with no money is a common dilemma. Fortunately, you can request the filing fee to be waived or paid in installments if you’re eligible. You can also save on lawyer’s fees if you file “pro se.” However, going DIY isn’t often ideal in this case. Bankruptcy law is complicated and is best left in the hands of professionals for your own sake.
Are you considering filing for bankruptcy or have you filed for it recently? We’d like to hear some tips from you through the comments below!