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Legal and filing fees in bankruptcy are paid prior to filing

In Arkansas and other states, a bankruptcy proceeding is initiated by filing a petition. The petition, accompanying schedules, and other mandatory forms make up a comprehensive package containing details of the filer's financial affairs, including bills, loans, tax obligations, income records, assets, household budget and a series of financial questions. The federal bankruptcy filing also includes counseling certificates, along with a special formulation of the filer's income and debts, called the means test, which is designed to determine the debtor's qualifications to file the petition.

A substantial increase in the paperwork and pre-bankruptcy preparation in the past decade has contributed to an increase in legal fees to file and process a bankruptcy. Furthermore, the court filing fees have also risen substantially, with the current fee for a Chapter 7 being $335. There are additional costs associated with obtaining a counseling certificate, in addition to a credit record to help document the debts owed.

Because a Chapter 13 is an ongoing process that may take three to five years to conclude, the legal fees will be much higher than for a Chapter 7. However, because the Chapter 13 involves a monthly payment plan to a court-appointed trustee, a good part of the legal fee may be incorporated into the payment plan. The spreading of part of the fees into monthly payments generally helps the filer to budget the legal fees in a Chapter 13 reorganization.

Understandably, an individual or married couple burdened with deep debt obligations may have some difficulty in raising legal fees. This is something that usually can be worked out, however, by consulting with the consumer bankruptcy attorney you have chosen to handle your case. Arrangements may be made to file the case at such time that the legal is paid in full to the attorney. Money that one has been putting into bills and debts will be freed up and some of that can go toward the legal fee. With the level of complexity involved in bankruptcy law in Arkansas and elsewhere today, it is preferable to have a qualified consumer bankruptcy attorney handling the case.

Source: nasdaq.com, "What Bankruptcy Costs and How to Pay for It", July 8, 2016

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