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updated: 10/30/2010 9:43 PM

Filing bankruptcy could cost you a lot now and later

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Even if you're broke, it's going to cost you.

The costs of going through the bankruptcy process, including lawyer and court fees, could run into thousands of dollars. And depending on the type of protection you're seeking and the complexity of the case, it could last as long as five years.

Filing bankruptcy isn't an overnight cure for mounting debt. And it's not as easy to walk away from that debt as you might think. With changes in the federal bankruptcy law in 2005, consumers face more stringent rules on filing, mostly to make it even tougher for those who may abuse the system by filing more than once, experts said.

"Bankruptcy is a tool, not a means to an end," said bankruptcy attorney Paul Bach, of Northbrook, state chair for Illinois with the National Association of Consumer Bankruptcy Attorneys.

Depending on the type of bankruptcy protection being sought, initial filing fees in U.S. Bankruptcy Court range from $274 to $299; financial counseling could cost up to $50; attorney fees range from $600 to $3,500 or more.

If you choose Chapter 7, where you can walk away from the debt and start fresh, you likely could be done within a year. But if you're still employed, then Chapter 13 provides a payment plan and a process that could last up to five years.

When you do emerge from bankruptcy, you'll face other costs.

Just for starters, a credit card could carry a higher interest rate and utilities likely will charge higher, upfront deposits, depending on your payment history with that utility.

For example, a deposit to reconnect your account with ComEd could be equal one month or up to six months of the cost of your electric bill. With the exception of the deposit, you'll be treated the same as any non-bankrupt customer, said ComEd spokeswoman Krissy Posey.

In 2009, ComEd's lost revenue totaled $84.3 million, unpaid by people who defaulted, including customers in bankruptcy.

Nicor Gas said it incurred lost revenue of $68.5 million due to defaults from customers bankruptcies and other causes in 2009.

Like ComEd, Nicor's deposit for someone emerging from bankruptcy varies, but averages about $125, said Nicor spokeswoman Annette Martinez.

Your credit rating also takes a major hit with a bankruptcy, which will remain on your record for about 10 years, although some reporting agencies may remove the mark in about seven years, experts said.

In the meantime, getting a loan could be tough as a result of your bankruptcy and tighter federal controls established during the recession.

"Most banks have policies to refrain from offering new credit products to those just out of bankruptcy for a certain time period determined by the institution," said Karen Perlman, a spokeswoman for MB Financial Bank.

With credit cards, Chase looks at a variety of factors to determine an individual's creditworthiness, said Chase spokesman Thomas A. Kelly.

"As an issuer that focuses on the super-prime and prime space, we generally do not seek out consumers who have previously declared bankruptcy," Kelly said.