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How people might pay for bankruptcy

| Apr 5, 2017 | Bankruptcy |

Kentucky consumers who are considering filing for bankruptcy may struggle with the cost of the process. Bankruptcy can cost as much as $1,500 or more, and people might use their tax refunds to pay for it. As a result, both March and April tend to show spikes for Chapter 7 bankruptcy filings.

The cost of bankruptcy has increased considerably since 2005 because in that year, a law was passed that made the process of filing more complex. Between 2003 and 2009, attorney fees increased almost 50 percent. Other ways that people may fund filing for bankruptcy might be through borrowing money from a friend or relative, arranging a payment plan with the attorney or getting free legal aid.

Bankruptcy discharges most unsecrured debt, including credit card and medical debt, but it usually does not discharge student loans or taxes. People might want to consider filing for bankruptcy if their debt is interfering with the rest of their life, if their debt is more than half their income or if they do not think it will be possible to pay off the debt in five years.

People who are considering filing for bankruptcy might want to discuss the situation with an attorney. The attorney may be able to assist them in assessing what their options may be for debt relief and what type of bankruptcy they might be eligible for. Whether a person is eligible for Chapter 7 or Chapter 13 bankruptcy is partly based on income. Chapter 13 bankruptcy allows individuals to keep some assets if they are able to work out a payment plan over three to five years. With a Chapter 7 bankruptcy, some assets are exempt from liquidation.