Bankruptcy Lawyer – Why Do You Need One?
Filing for bankruptcy can help get your finances in shape. But since a bankruptcy filing involves legal matters, it can be challenging to navigate the bankruptcy process alone. You can file the case without legal help, known as going pro se, but experts typically recommend relying on a bankruptcy lawyer to handle your case.
Here’s how to decide if you need a bankruptcy lawyer and what to expect whether you hire an attorney or go pro se.
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What Types of Bankruptcy Are There?
The United States Bankruptcy Code defines six types of bankruptcy. But, when filing for bankruptcy as an individual, cases often fall under one of two types: Chapter 7 or Chapter 13.
Chapter 7, also known as liquidation bankruptcy, wipes out debts. It’s designed for people who’ve been unable to make monthly debt payments. In a Chapter 7 case, a court-appointed trustee sells your assets liquidates them for cash, and distributes the proceeds to your creditors. Some assets may be exempt, such as your car or household furnishings. Once completed, Chapter 7 releases you from responsibility for all the debts covered in the bankruptcy case.
In a Chapter 13 bankruptcy case, also called a wage earner’s or repayment plan, the court approves a repayment plan that lets you pay off debts over a three- to five-year period. After these debts are paid, you’re no longer responsible for them. This type of bankruptcy may allow you to keep property that you could lose in a Chapter 7 case, such as a house that’s in foreclosure. Notably, you must make all of your mortgage payments on time during the Chapter 13 payment plan.
What Is a Bankruptcy Lawyer?
A bankruptcy lawyer specializes in giving legal advice to a client about bankruptcy, prepares legal documents for the client, and represents the client in court. An attorney must hold a law degree and be licensed in the state where they do business.
As your guide through the bankruptcy process, a lawyer can advise you about matters such as:
Whether to file for bankruptcy
Which type of bankruptcy to file
How the bankruptcy process works
Which court-provided forms need to be completed
What kinds of debts can be reduced or eliminated
Whether you’ll be able to hang on to your home, car, or other property after the bankruptcy case is finished
Overall, a bankruptcy lawyer can steer you in the right legal direction. If you handle a bankruptcy case without a lawyer, you may make legal mistakes that carry long-term financial consequences.
What To Expect From a Bankruptcy Lawyer
If you hire a bankruptcy lawyer, here’s what to expect:
A written agreement, or contract, between you and the lawyer. The agreement will likely include an overview of the lawyer’s work for you.
A description of payment arrangements. For example, will the lawyer charge an hourly or a flat fee? How much will the fees be?
Ongoing discussions. You’ll talk about how the lawyer is handling your case.
An agreement. You’ll agree on how and how often the lawyer will update you about your case.
A list of documents. The lawyer should provide you with a complete list of documents needed for your bankruptcy case.
Do I Need a Bankruptcy Lawyer?
Representing yourself in court is an option. Whether it’s the right option for you depends on your situation. Keep in mind that you have better odds of a successful bankruptcy when hiring a lawyer. According to a 2018 study by the American Bankruptcy Institute, Chapter 7 pro se filers are nearly 10 times more likely than lawyer-represented filers to have their cases dismissed or some debt discharge requests denied.
Filing for bankruptcy can stay on your credit report for seven or 10 years, depending on the type of bankruptcy. Therefore, it’s important to consider hiring a bankruptcy lawyer. Here are three reasons you may need one:
You’re uncomfortable dealing with the bankruptcy case on your own. It can be intimidating to represent yourself in court, and a bankruptcy lawyer can take care of legal matters on your behalf.
You’re worried about the paperwork. Court cases typically involve a lot of documents. If you incorrectly fill out paperwork or turn it in past the deadline, for instance, it could endanger your bankruptcy case. A bankruptcy lawyer can keep the paperwork on track, including any documents like credit card bills that you must submit.
You’re tired of hearing from debt collectors. If debt collectors are constantly bugging you, a bankruptcy attorney can deal with them instead. Once you tell a debt collector that a lawyer represents you, the collector is supposed to communicate with the lawyer, not you.
Keep in mind that if you can’t afford to hire a bankruptcy lawyer, you may qualify for free legal services where you live. Contact your local or state bar association to find free legal services in your area.
How To File for Bankruptcy Without a Lawyer
You can file for bankruptcy without a lawyer and go pro se. Here’s how.
Before doing anything else, you should familiarize yourself with the Bankruptcy Code and the federal rules about bankruptcy procedures. The federal court handling your case will expect you to follow the proper bankruptcy rules and procedures, just as a bankruptcy lawyer is expected to do. It’s worth noting that the Bankruptcy Code and federal rules are written in language familiar to lawyers and judges but not to an average person.
Choose the Type of Bankruptcy To File
Next, you need to figure out which type of bankruptcy you should file. The main choices for an individual are Chapter 7 liquidation bankruptcy and Chapter 13 wage earners or repayment plan. You then must find out which bankruptcy court is the appropriate one for your bankruptcy filing. There are 94 federal judicial districts across the country that handle bankruptcies.
If you file for Chapter 7 bankruptcy, you typically must take what’s known as a means test. This test determines whether you qualify for Chapter 7 or Chapter 13. To complete this test, you must fill out official forms. Much of the information requested on the forms involves your income and expenses.
Go Through Credit Counseling
Keep in mind that federal law requires you to go through credit counseling from an approved provider before you’re able to file for bankruptcy. This must be done within 180 days before filing for bankruptcy. Once you complete the credit counseling session, you’ll receive a certificate that you must submit with your bankruptcy filing.
Fill Out Bankruptcy Forms
Once you’ve settled on which type of bankruptcy you’re filing for, you must fill out a court document Official Form 101 known as a Voluntary Petition for Individuals Filing for Bankruptcy. This eight-page form asks for information such as your name, address, Social Security number, dollar estimates for your assets and liabilities debts, and the kinds of debt you have.
You must submit several other forms along with the bankruptcy petition, and you must pay a filing fee unless the court agrees to waive it when you’re seeking Chapter 7 bankruptcy. Within 14 days of filing, you must turn in another batch of documents. All of these forms will ask for information like a list of creditors, a rundown of the property you own, and a summary of your income and expenses. Other forms that are strictly for a Chapter 7 or a Chapter 13 case also must be submitted.
You can get help from a non-attorney petition preparer such as a paralegal to fill out the bankruptcy paperwork. But a petition preparer can’t provide legal advice and can’t show up in court on your behalf. In other words, you’re still handling the case on a pro se basis.
Meet With Creditors
Once the court gives the go-ahead for your bankruptcy case, you’ll typically deal with a court-appointed bankruptcy trustee. You’ll normally interact very little with the bankruptcy judge assigned to your case. In most situations, the only formal proceeding you must attend is a meeting with creditors, called a 341 Meeting. Keep in mind that the bankruptcy judge and court employees are prohibited from offering legal advice to you.
Wait for a Discharge of Debts
A Chapter 7 case typically takes four to six months, from the time you file for bankruptcy to the time your debts are wiped out. Meanwhile, a Chapter 13 case lasts as long as five years because you’re getting rid of your debts through a repayment plan.
Pros and Cons of Filing for Bankruptcy Without a Lawyer
The biggest advantage of filing for bankruptcy on your own is that you can avoid paying a lawyer for their services. The disadvantages include being unfamiliar with the legal process unless you’re an attorney, having to fill out a lot of forms, possibly making mistakes on those forms, and missing court-ordered deadlines.
How To Find a Bankruptcy Lawyer
If you decide to hire a bankruptcy lawyer to handle your case, you’ll want to pick one who’s reputable and qualified. Here are some ways to find a trustworthy bankruptcy lawyer:
Ask trusted relatives, friends, or coworkers for recommendations.
Search the website of the National Association of Consumer Bankruptcy Attorneys.
Check with your state or local bar association.
Contact a lawyer referral service.
However, if you identify them, talk with at least two lawyers before settling on the one who’ll take on your case. Among other things, you should inquire about their experience with bankruptcy cases and the fees they charge.
Filing for bankruptcy is a significant decision. After all, a bankruptcy filing remains on your credit report for seven to 10 years, depending on the type of bankruptcy. Carefully consider whether you want to hire a bankruptcy lawyer or whether you want to go the more complicated route of handling it on your own. Regardless of which way you go, Chapter 7 or Chapter 13 bankruptcy can give you a fresh start in managing your money.