Ironically, it is not cheap to file bankruptcy. Don't misunderstand me. For most people who are struggling with their financial situation filing bankruptcy is much less expensive than repaying the debts to be discharged in the bankruptcy case. But there are costs associated with filing bankruptcy. These include attorney's fees, the court's filing fee, and costs associated with ordering a credit report and taking the credit counseling and financial management courses required by the Bankruptcy Code.
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Fortunately, debtors who are truly needy may be able to avoid paying the court's fee, which as of the time of my writing this article is up to $306.00. In order to avoid this cost, a debtor must file an application for waiver of this cost. Obtaining waiver requires that the debtor qualify under a four-part test.
First, the debtor must be an individual. Business debtors cannot obtain waiver. Second, waiver can only be obtained in Chapter 7 bankruptcy cases. Chapter 13 debtors are not eligible. Third, the debtor's household income must not exceed 150% of the poverty level based upon their household size. Fourth, the debtor must show that they are not financially capable of paying this cost in installments over 120 days.
Whether or not to grant waiver is up to the bankruptcy judge presiding over the case. However, even if the judge wants to grant the waiver, he can't if the debtor's income exceeds 150% of the poverty level for the debtor's household size. The poverty guidelines are published by the U.S. Department of Health and Human Services. The judge will also consider other factors, including the debtor's assets, how much they paid their attorney for representation in the bankruptcy case, and whether there is reason to believe that the debtor's income will increase in the near future.
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