If you’re struggling with overwhelming debt in New York, you may be considering filing for bankruptcy as a way to get a fresh financial start. Two of the most common types of personal bankruptcy are Chapter 7 and Chapter 13. But which one is cheaper to file in New York? The answer depends on several factors specific to your financial situation.
In this guide, we’ll break down the costs associated with filing Chapter 7 and Chapter 13 bankruptcy in New York. We’ll look at court filing fees, attorney fees, mandatory credit counseling costs, and other expenses you may encounter. We’ll also explore the pros and cons of each type of bankruptcy to help you determine which option may be best for your circumstances.
Overview of Chapter 7 versus Chapter 13 Bankruptcy
Before we dive into the costs, let’s briefly review the key differences between Chapter 7 and Chapter 13 bankruptcy:
Chapter 7 Bankruptcy
- Also known as “liquidation” bankruptcy
- Eliminates most unsecured debts like credit cards and medical bills
- Takes about three to four months to complete
- May need you to give up some assets to pay creditors
- Income must be below New York’s median income to qualify.
Chapter 13 Bankruptcy
- Also called “reorganization” bankruptcy
- Creates a repayment plan over three to five years to pay back some or all debts
- Allows you to keep assets like your home and car
- Generous income limits to qualify
- Takes three to five years to complete.
Now let’s look at the specific costs associated with each type of bankruptcy in New York.
Bankruptcy Court Filing Fees
The first expense you’ll encounter when filing bankruptcy is the court filing fee. As of 2024, the filing fees in New York are:
- Chapter 7: $338
- Chapter 13: $313.
These fees are set by federal law and are the same across the entire state of New York. They must be paid when you file your bankruptcy petition with the court, unless you qualify for a fee waiver or to pay in installments.
Fee Waivers
If your income is below 150% of the federal poverty guidelines, you may qualify to have your Chapter 7 filing fee waived. To request a fee waiver, you’ll need to submit an application to the court explaining your financial situation.
Fee waivers are not available for Chapter 13 cases. This is because Chapter 13 requires you to have sufficient income to fund a repayment plan.
Installment Payments
If you can’t afford to pay the full filing fee upfront but don’t qualify for a waiver, you can apply to pay in installments. The court will typically allow you to split the fee into four payments over 120 days.
Attorney Fees
While it’s possible to file bankruptcy without a lawyer, it’s generally not recommended, especially for Chapter 13 cases. Bankruptcy law is complex, and mistakes can be costly. Most people choose to hire an attorney to guide them through the process.
Attorney fees vary widely based on the complexity of your case and the attorney’s experience level. Here are some typical ranges for bankruptcy attorney fees in New York:
Chapter 7 Attorney Fees
- Simple case: $1,000 – $2,500
- Complex case: $2,500 – $5,000+
Chapter 13 Attorney Fees
- Simple case: $3,500 – $5,000
- Complex case: $5,000 – $7,500+.
Chapter 13 cases tend to be more expensive because they are more complex and time-consuming for the attorney. The case lasts three to five years, requiring ongoing work from your lawyer.
Note that in Chapter 13 cases, attorney fees can often be included in your repayment plan. This allows you to pay them over time rather than all upfront.
When comparing attorney fees, be sure to clarify with each lawyer what their fee system is and what services are included. Some lawyers charge a flat fee that covers the entire case, while others may charge extra for certain services.
Credit Counseling and Debtor Education Courses
All bankruptcy filers are required to complete two financial education courses: credit counseling course before filing and debtor education course after filing. These courses are designed to help you understand your finances and avoid future debt problems. They typically cost $20 to $50 each and can be completed online, by phone, or in person.
Some providers offer discounts if you take both courses together. And if your income is below 150% of the federal poverty level, you may qualify for free courses.
Bankruptcy Trustee Fees
In Chapter 7 cases, the trustee receives a commission based on any non-exempt assets they sell to pay creditors. In most cases, there are no assets to sell, so this fee doesn’t apply.
In Chapter 13 cases, the trustee takes a percentage (usually about 10%) of your monthly plan payments as their fee.
Additional Costs
Depending on your situation, you may encounter some additional expenses when filing bankruptcy:
Credit Reports
Your attorney will need copies of your credit reports to prepare your bankruptcy petition. While you’re entitled to one free report per year from each credit bureau, you may need a fee to obtain more recent or comprehensive reports.
Asset Appraisals
If you own valuable property like a home or car, you may need to have it appraised to determine its current market value. This typically costs $200 to $500 per appraisal.
Miscellaneous Expenses
Other potential costs include:
- Photocopying and postage fees
- Transportation costs to attend court hearings and meetings
- Fees to amend your bankruptcy petition if needed.
Total Cost Comparison
So which type of bankruptcy is ultimately cheaper in New York? Let’s break down the total costs for a typical case:
Chapter 7 Total Costs
- Filing fee: $338
- Attorney fees: $1,500 (average for a simple case)
- Credit counseling courses: $50
- Miscellaneous expenses: $100.
Total: Approximately $2,000
Chapter 13 Total Costs
- Filing fee: $313
- Attorney fees: $4,000 (average for a simple case)
- Credit counseling courses: $50
- Trustee fees: Varies based on your repayment plan
- Miscellaneous expenses: $200.
Total: Approximately $4,500 – $5,000+
Based on these estimates, Chapter 7 is generally the cheaper option upfront. However, it’s crucial to consider more than just the initial costs when deciding which type of bankruptcy to file.
Other Factors to Consider
While cost is certainly an important factor, it shouldn’t be the only consideration when choosing between Chapter 7 and Chapter 13 bankruptcy. Here are some other key points to keep in mind:
Eligibility
Not everyone qualifies for Chapter 7 bankruptcy. If your income is above New York’s median income for your household size, you’ll need to pass a means test to file Chapter 7. If you don’t pass, Chapter 13 may be your only option.
Asset Protection
Chapter 7 bankruptcy may require you to give up some assets to pay creditors. While New York’s bankruptcy exemptions protect many types of property, if you have significant non-exempt assets, Chapter 13 may allow you to keep more of your property.
Debt Discharge
Chapter 7 typically discharges more of your unsecured debts than Chapter 13. In a Chapter 13 case, you’ll likely pay back at least a portion of your unsecured debts through your repayment plan.
Foreclosure and Repossession
If you’re behind on your mortgage or car payments, Chapter 13 provides tools to help you catch up and keep your property. Chapter 7 doesn’t offer the same protections against foreclosure or repossession.
Credit Impact
Both types of bankruptcy will negatively impact your credit score, but Chapter 7 typically stays on your credit report for 10 years, while Chapter 13 is removed after 7 years.
Long-Term Financial Health
While Chapter 7 may be cheaper upfront, Chapter 13 can provide valuable financial education and discipline through the repayment plan process. This may lead to better long-term financial habits.
The Choice of Which is Cheaper
In most cases, Chapter 7 bankruptcy is cheaper to file than Chapter 13 in New York. However, the best choice for you depends on your unique financial situation, goals, and eligibility.
If you’re considering bankruptcy, it’s wise to consult an experienced New York bankruptcy attorney. They can review your finances, explain your options, and help you choose the best path forward. Many offer free initial consultations, allowing you to get expert advice before committing to any costs.
Remember, while bankruptcy does come with upfront expenses, it can provide invaluable long-term financial relief. If you’re drowning in debt, the cost of filing bankruptcy may be well worth the fresh start it provides.
Which Is the Right Type of Bankruptcy for Your Situation? Contact Attorney John D’Amato Today.
Filing for bankruptcy is a major decision, and the filing costs shouldn’t be the only factor when you’re trying to weigh between Chapter 7 and Chapter 13. Consult with an experienced bankruptcy attorney to determine the appropriate path for your circumstances.
At John D’Amato PLLC, we’re here to assist you through the bankruptcy process and work towards debt relief. For three decades now, we’ve helped New Yorkers find the best legal strategy for their situation and free themselves from debt. Call us at (716) 703-9099 to schedule a free consultation and discuss your options.