Typically when someone wants to file for Chapter 7 (“liquidation”) bankruptcy, they have to pay the legal fees up front before the case can be filed. The reason for this is because if the legal fees are not paid before the case is filed, then the legal fees are discharged in the bankruptcy along with the other debt.
Coming up with a big lump sum of money to pay an attorney can be a problem for a lot of people, especially when money is already tight.
This is why Chapter 13 can sometimes be a better solution.
Chapter 13 cases can be filed for no money down because the attorney fees and court costs can be rolled into a 3-5 year repayment plan. While you’re at it, you can also wipe away all of your other unsecured debt (credit cards, medical bills, payday loans, old collections, etc.).
Chapter 13 is a “reorganization,” where you consolidate everything into a monthly repayment plan. However, just because you consolidate the debt into a payment plan doesn’t mean you have to actually pay all of the debt back.
A common misconception is that you have to pay all of your creditors back in full in Chapter 13. That is simply not true.