Should You File For Bankruptcy with No Money?

The cost of a bankruptcy is always a concern for debtors. The reason people file for bankruptcy in the first place is that they’re in dire financial straits. They have outstanding debts that they cannot repay. However, even for those in this tough financial position, filing for bankruptcy with no money and doing so successfully is nearly impossible.

To file for bankruptcy, you need to pay a filing fee and an attorney’s fee. The additional fees when filing for bankruptcy largely depend on the type of bankruptcy that you file.

Either way, one thing is clear: there will be fees.

For instance, filing charges usually fall between $310 and $335. Aside from the filing charges, you also need to pay your attorney.

To be clear, bankruptcy laws don’t require that debtors hire attorneys. However, if you don’t, you’ll be entering a complicated process that requires the expertise of a sharp legal mind to navigate through without any hiccups, and the consequences of a misstep can be dire and expensive.

Debtors should not enter into a process with which they have no experience and expect for it to turn out well. It’s like we said before: a successful bankruptcy requires the appropriate legal know-how and attention to detail.

If you don’t have either of those things, hire a bankruptcy attorney before starting the process. Otherwise, you may end up in a worse situation than you started in.

But Can You File Bankruptcy with No Money?

Technically, filing for bankruptcy with no money is possible, even if you don’t have the funds to pay for your filing fees right away. This does not mean it’s advisable.

In many cases, the court will work with you, but you’ll have to pay eventually. There will be costs that are out of your hands, like filing fees and credit counseling. The costs of bankruptcy still remain, even if you choose to represent yourself.

If you file for a Chapter 7 bankruptcy and are unable to pay the filing fee within 120 days, you can ask the court for a fee waiver. Since the bankruptcy court bases the waivers on income limits, you can combine your family income and see if it is 50% less than the poverty limit to qualify. To be clear, this will not get you a lawyer – it will only help with the filing fees.

If you do not qualify within the poverty limit, you can apply to pay the filing fee in installments. If you file for Chapter 13 bankruptcy, you can roll the court fees into a repayment plan and ask the bankruptcy court to file in installments.

Filing Bankruptcy Without A Lawyer – Should You Do It?

Simply put, No. Filing for bankruptcy without a lawyer is a bad idea. We’ve said it a lot of different ways, already but it cannot be overstated enough.

You should try to make it happen any way you can. Lawyers may be willing to work in payment installments, and something as big as bankruptcy should not be taken lightly. Not paying for a lawyer is a short-sighted solution that can put you in a worse situation than you started in.

In fact, you should not even hire an inexperienced attorney. Bankruptcy involves complex federal laws and rules. Attorneys need a thorough understanding of the Bankruptcy Code, Bankruptcy Rules and local rules. One mistake could cost you big. It could even cost your property.

Very few bankruptcies are successful without the presence of an experienced lawyer, and that’s because lawyers do things like:

  • Determine your bankruptcy chapter: It is essential that you know which bankruptcy chapter you should file for, and the different methods of filing. Filing a Chapter 7 is much different than filing Chapter 13
  • Know the exemptions of your state: Different states have varying bankruptcy exemptions. Bankruptcy laws allow you to keep some of your assets and properties through state exemptions. When filing for bankruptcy,  you need to study the exemptions in your state. This is crucial so that you can avoid liquidating properties that you should be able to keep.
  • Prepare all documents and paperwork: These include all the court documents and forms to be filled out as well as the personal information needed such as bills, pay stubs and other financial statements. Remember that if you do not have all the documents needed, the bankruptcy court can reject or dismiss your case.
  • Meet with your creditors: It may be challenging to arrange a meeting with creditors. Your creditors will ask you about how you plan to pay them back or your source of income to pay your debts. The meeting with your creditors can be stressful. especially if your creditors reject your repayment plan or think that your repayment plan is insufficient. It is critical that you put forth a repayment plan that is attractive to your creditors while also ensuring that it is realistic for you.
  • Make court appearances: When you hire a bankruptcy attorney, you only need to go to court once. But filing bankruptcy requires your attorney to make the necessary court appearances. It is crucial that he or she attend all court sessions. If you represent yourself, you have to make these appearances in person.

A Closer Look At Chapter 7

Chapter 7 bankruptcy does not involve a repayment plan. Further, it is only applicable to individuals and not corporations or partnerships.

This type of bankruptcy Chapter begins with the debtor filing for a petition with the bankruptcy court to discharge the debts and to stop collecting agencies from hounding the debtor with lawsuits, wage garnishments, and other actions.

Though less complicated than Chapter 13, it is still a serious legal process that needs to be executed seamlessly to be successful. Filing without a lawyer is never advisable.

A Closer Look At Chapter 13

This type of bankruptcy refers to the creation of a repayment plan so that you can settle and catch up on your debts. The rule in Chapter 13 is that you can only have a total of $1,081,400 in secured debts (mortgage and auto loans) and $360,475 in unsecured debts (credit card debts).

Unlike Chapter 7, Chapter 13 bankruptcy is all about creating a repayment plan that will last for 36 to 60 months, wherein you pay your debts regularly. The best thing about this type of bankruptcy is that the administration fee, filing fee, and some of your attorney’s fees are covered by this type of bankruptcy.

Although it will extend the duration of your payment plan, this is a great option especially if you have a steady stream of income to settle your debts. Otherwise, you should stick to Chapter 7 bankruptcy.

It’s important to note that filing Chapter 13 is very complicated and doing so without a lawyer is reckless and irresponsible.

What’s Better: Filing For Bankruptcy or Doing Nothing?

If you don’t have the money to file for bankruptcy right now, you might be thinking about some of your other options. One of them is doing nothing―sitting tight.

Realize that you don’t have to file for bankruptcy right away if you don’t have the means available. To determine the urgency of your bankruptcy, decide if any of your property is vulnerable to creditors.

If you don’t own real estate or other assets that you can’t protect from creditors, you likely have some time before you need to file. Some states even have statutes that protect things like cars, homes or living necessities from your creditors.

So the answer to the question of what’s better probably has a lot to do with your individual situation. Do the appropriate research and decide what the best course of action is for you. Even spending some money and buying a consultation with a bankruptcy attorney is probably worth it to protect your property.

Filing For Bankruptcy Isn’t Free

No matter what way you look at it, filing for bankruptcy won’t be free. You will either have to pay the filing fees, pay your lawyer or repay your debts down the line. You can cut out the lawyer fees by doing it yourself, but think about what that will cost you.

Is time away from work or family or the stress of having everything in your own hands worth it? You might feel much more secure if you leave the task to a qualified bankruptcy attorney.

Even if you’re unsure if you can afford it, get in touch with Leinart Law Firm to see how we can help you navigate bankruptcy successfully.

Schedule a FREE, no-obligation consultation and evaluation today.