How to File Bankruptcy for Low Income Individuals

According to Reed Law Firm, P.A., ​434,540​ individuals and businesses filed for bankruptcy by the end of ​September 2021​. This represents a ​30 percent​ drop from the same time span in ​2020​, but many are still seeking relief from crushing loads of debt. Bankruptcy filings are particularly problematic for low-income individuals, as they have far fewer resources to pay, but there are ways to lower the cost.

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Hiring a Lawyer

The first decision in low income bankruptcies is whether or not to use a lawyer. Depending on where you live, a non-profit legal aid association may be able to help. Special circumstances, such as being a veteran or dealing with a disability, may lessen the income requirements or make you more likely to qualify for assistance. Some lawyers also perform a certain amount of casework pro-bono.

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Your state bar association may have information on both of these programs. Some lawyers will allow you to complete some filing paperwork on your own, saving you money.

Do not charge the lawyer's fee on a credit card. Credit card companies review charges in the time before bankruptcy carefully, and any charges in that time period may be excluded from the bankruptcy --and perhaps the entire balance on that card along with it.

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Consider Also:Tax Return Preparation: Tax Services, Tax Help & More

Considering Filing Fees

Bankruptcy requires a fee just for filing the paperwork. The fee is dependent upon which type of bankruptcy you are filing. The United States Bankruptcy Court Middle District of Florida reports a total fee of ​$338 for Chapter 7​ and ​$313 for Chapter 13​. However, you can ask the court for a waiver of that filing fee.

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To qualify for that waiver, you must have income of less than ​150 percent​ of the federal poverty level, and be unable to pay the fee in installments. According to the United States Courts, a family's income must be ​150 percent or less​ than the HHS Poverty Guidelines for ​2021​ to qualify for the fee waiver. Even then, approval of the waiver is up to the judge.

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Even if you do not qualify for a fee waiver, you can ask to pay the fee in installments. This can make a bankruptcy filing more affordable.

Consider Also:What Happens If You Don't File Taxes?

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Choosing Chapter 7 or 13

Many people with low incomes qualify for a Chapter 7 bankruptcy, because they cannot make installment payments that Chapter 13 requires. Because of this, low-income filers usually do not have to deal with the increased costs of a Chapter 13 bankruptcy. However, if you do file for a Chapter 13, you'll pay monthly debt payments to the trustee to send to your creditors. The trustee keeps a percentage of these payments as a fee for handling the bankruptcy.

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Considering Pro Se Filing

A pro se filing means that you file for bankruptcy without a lawyer. You may choose to do this if your case is very simple. A paralegal may be able help you complete the forms and do the calculations needed for the filing for much less than a lawyer would charge.

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Be careful when completing bankruptcy forms yourself. The complicated calculations make mistakes common, and with an error, you could have your bankruptcy dismissed.

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