How Much Does It Cost to File Chapter 11 Bankruptcy?

Posted on Friday, December 1st, 2023 at 9:00 am    

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Taking on debt is part and parcel of starting a business in most cases. However, many businesses struggle to get out of debt, even after operating for many years. When a company cannot afford its repayment plans, filing bankruptcy can give the business some much-needed financial relief.

Chapter 11 bankruptcy is an attractive option because it permits a business to continue operations after the bankruptcy is complete. However, the process is complex, and the costs can be significant. In addition to costly filing, administrative, and legal fees, you might also be required to pay quarterly costs during the length of your case. Understanding bankruptcy Chapter 11’s upfront costs can help you make an informed decision about whether it is right for you. 

How Does Chapter 11 Bankruptcy Work?

Chapter 11 bankruptcy is a reorganization process that permits businesses to restructure their debts and obligations. The business proposes a plan to repay creditors over time, which may involve downsizing operations, selling assets, or renegotiating contracts. The court must approve the plan, and the business must follow it closely. During this process, the business continues to operate, but significant decisions must be approved by the bankruptcy court. 

What Are the Advantages of Chapter 11 over Chapter 7 Bankruptcy?

The primary advantage of Chapter 11 over Chapter 7 bankruptcy is that it allows a business to continue operating while it reorganizes its debts. In Chapter 7, the business must liquidate its assets and cease operations. Chapter 11 allows businesses to get back on track financially while maintaining their customer base and workforce. Additionally, Chapter 11 allows business owners to retain control of the company, whereas in Chapter 7, a trustee is appointed to oversee the liquidation process. 

What Is the Filing Fee for Chapter 11?

The bankruptcy courts in each U.S. District determine filing fees for Chapter 11. In the Eastern District of North Carolina, the filing fee for Chapter 11 is $1,167, and the administrative fee is $571.00, for a total of $1,738. These fees are significantly more than other forms of bankruptcy in North Carolina. You may also be required to pay quarterly fees for the duration of your case. 

What Are the Quarterly Fees for Chapter 11?

In addition to the filing and administrative fees, businesses that file for Chapter 11 bankruptcy must pay fees on a quarterly basis to the U.S. Trustee Program. These fees are based on the amount of disbursements made during each quarter. The minimum quarterly fee is $250 for disbursements less than $62,624, and the maximum quarterly fee is $250,000 for disbursements of $31,249,938 million or more. These fees continue until the case is closed, dismissed, or converted to another chapter of bankruptcy. 

How Much Does a Bankruptcy Lawyer Cost?

The cost of a bankruptcy lawyer for Chapter 11 can vary widely depending on the complexity of the case and the lawyer’s experience. Generally, attorneys charge an hourly rate for their services. Some lawyers may also require a retainer fee upfront. It’s not uncommon for legal fees in a Chapter 11 case to reach tens of thousands of dollars. However, for many businesses, the cost of legal representation is necessary to manage the complex bankruptcy process successfully. Your lawyer should always be upfront with you about their fee structure so you can avoid any surprises down the line. 

Do I Need a Lawyer to File Bankruptcy in North Carolina?

How Much Does It Cost to File Chapter 11 BankruptcyWhile it is possible to file for bankruptcy without a lawyer, working with an experienced bankruptcy attorney is highly recommended, especially for Chapter 11 cases. The Chapter 11 process is complex and involves extensive paperwork, court appearances, and negotiations with creditors. A skilled bankruptcy lawyer can help you understand your options, develop a strong reorganization plan, and guide you through the legal process. Attempting to file for Chapter 11 without legal representation can lead to costly mistakes and may jeopardize your chances of a successful outcome. 

Contact an Experienced Business Bankruptcy Lawyer Today

A successful Chapter 11 filing depends on entering into the arrangement with clarity and getting all the details right. With so much at stake, it is essential to work with a Raleigh business bankruptcy attorney with a thorough knowledge of the process. The experienced legal team at Bradford Law Offices has helped put North Carolina businesses on the path to financial health for over 25 years. Let us give you the support and advocacy you need at this challenging time. Call us today at (919) 758-8879 or contact us via our online form to learn more about our services.

Written By: Danny Bradford Last Updated: May 6, 2024