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Bankruptcy Law Blog

Thursday, November 30, 2017

Why Isn’t Bankruptcy Free?

Potential clients often ask us why it costs money to file for bankruptcy. While we can appreciate how frustrating it can be to be forced to spend money to get help because you don’t have enough money, we are reminded of the old expression “Why buy the cow if you can get the milk for free?”. It is typically offered as a warning to young women who might be tempted to give their partner the “benefits of marriage” without having a ring on her finger. But we think it is also applicable in the bankruptcy context.

Why would the government agree to a policy of wiping out debts without requiring the debtor to show they are committed to making some changes and making a better life after going through the bankruptcy process? Paying the filing fee is a debtor’s way of telling the court that they are serious about the process. It is the ring on the finger.

It is also important to remember that the bankruptcy filing fee comes nowhere near covering the full cost of facilitating the bankruptcy. Taxpayers subsidize the bankruptcy courts, just like they do for every other type of case. This further illustrates how the fee acts as a gate that keeps out those who aren’t taking the process seriously, or who want to take advantage of the system.

If a debtor cannot come up with enough money to cover the filing fee up front, it is possible to pay the fee in installments or have it waived. In order to qualify for a fee waiver, the household income of the filer must be less than 150% of the federal poverty level. The debtor must also demonstrate that he or she does not have sufficient income to pay the fee in installment payments. To do this, he or she will provide detailed information about income and expenses, and write a few sentences giving context to that information. Many debtors ask their attorney to help them fill out the necessary paperwork because it is important not to make any mistakes, or to say something different than what one has said in other filings.

 


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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”