Bankruptcy is a legal procedure initiated by an individual or a business that cannot pay their debts and seeks to have the debts discharged or reorganized by the courts. The three most common types of bankruptcy proceedings are Chapter 7 individual petitions, Chapter 11 business reorganization and rehabilitation petitions, and Chapter 13 wage earner’s plans.
Bankruptcy cases almost exclusively fall under federal law, though states may pass laws governing issues that federal law doesn’t address. Special bankruptcy courts nationwide handle only debtor-creditor cases. Generally, any bankruptcy-related claim must be filed with the Utah Bankruptcy Court.
Terms to Know
• Bankruptcy Petition: The document filed that initiates a bankruptcy proceeding; usually contains the debtor’s assets, debts, and other liabilities
• Chapter 7 (Individual Bankruptcy): A petition filed for an individual debtor to liquidate his or her assets and settle or discharge debts
• Chapter 11 (Business Reorganization): A petition filed for a business to reorganize its liabilities and assets, as well as settle or discharge its debts
• Chapter 13 (Wage Earner’s Plan): A petition filed where an insolvent debtor may ask the court to grant additional time for the debtor to pay off his or her debts, so long as the debtor is earning a steady income
• Insolvent – Unable to pay one’s debts as they come due
• Discharge – To release a debtor from his or her liability to pay a debt
Considerations When Hiring a Bankruptcy Lawyer
Although most lawyers are free to request permission to practice in Utah Bankruptcy Court, effectively representing bankruptcy clients requires thorough knowledge of the U.S. Bankruptcy Code. Attorneys without the proper experience may not know all of the options available to a client facing bankruptcy, and as a result, they may not be able to broker the most advantageous bankruptcy plans. Bankruptcy proceedings can have long-term benefits and consequences for an individual’s financial and family situations. This is another reason why finding an experienced lawyer is essential. A lawyer who has helped many clients through bankruptcy can better prepare you and protect your assets and minimize the negative effects. If you are facing bankruptcy, contact a bankruptcy lawyer immediately to preserve your legal rights and explore your legal options.
How to Find a Good Bankruptcy Lawyer
1. Look For A Specialist
Lawyers practice in multiple areas and your best bet would be to go with someone who expressly specializes in bankruptcy law. Attorneys who dabble in a little of everything are likely not aware of the granular aspects of bankruptcy law or up to speed with the latest legal developments in this area of practice. Membership in associations such as the National Association of Consumer Bankruptcy Attorneys would be a good sign.
2. Choose An Attorney With Adequate Experience
Ask about an attorney’s level of experience. It’s not necessarily the case that someone with more years of experience is always better equipped than someone with fewer years of experience. What matters is the number of bankruptcy cases they have successfully handled.
The National Association of Consumer Bankruptcy Attorneys (NACBA) advises, “There are some attorneys who have practiced bankruptcy law for many years, but have never really mastered the subject. There are other attorneys who have pursued a general practice, filing a case now and then. If they have been practicing for 25 years without much in-depth experience in bankruptcy that does not translate to the expertise you need.”
3. Focus On Bankruptcy Attorneys With Local Expertise
Besides being familiar with bankruptcy laws, the attorney should be familiar with the local laws of the court where your bankruptcy case will be filed. Bankruptcy procedures tend to vary from locality to locality. That’s why you should look for a bankruptcy attorney who has practiced in your filing locality. They can use their knowledge of the local court procedures and personnel to your benefit.
4. Avoid Bankruptcy Mills
There are so-called “bankruptcy mills” that handle large numbers of cases without focusing on the specifics of each client’s case. Avoid attorneys with such an assembly line approach. There are also “petition preparers” who are not qualified attorneys and will just fill out the bankruptcy paperwork for you. They cannot offer legal advice or shepherd you through the bankruptcy process. Be wary of hiring them, too.
5. It Comes Down To Your Comfort Level
At the end of the day, you should go with a bankruptcy attorney that you feel comfortable with. Look for someone who will listen to you and get the specifics relating to your case to best understand your situation and represent you. Don’t make a decision based solely on price. Paying a good lawyer their going rate could save you money if they successfully represent you. Someone charging a low rate could be cutting corners, which could lead to a bad outcome on your bankruptcy case.
Ask around for referrals and do your own online research as well. The NACBA could also serve as a resource. Hopefully, this will help you find a bankruptcy attorney who will meet your needs and lead to a successful outcome for your case.
Working with a Bankruptcy Lawyer
Many debtors file for bankruptcy on their own rather than retaining an attorney, feeling reluctant to bear the additional cost. However, hiring a bankruptcy lawyer can help you approach the situation more strategically. An attorney can advise you on alternatives to bankruptcy so that you can make sure to choose the right path for you.
They also can explain the process so that you are not surprised by anything that happens, such as the loss of some of your property. The attorney will review your case with an eye toward any issues that the bankruptcy trustee or creditors might raise. They also will attend the Section 341 meeting of creditors and handle interactions with the trustee. If a dispute arises in the course of your bankruptcy, they can advocate for you in court or during settlement negotiations.
Issues to Discuss with an Attorney
One of the most critical areas in which an attorney may be useful is determining which chapter of the bankruptcy code should serve as the basis for your filing. An attorney can help you go through the means test to determine whether you are eligible for Chapter 7. If you are not eligible, or if Chapter 7 is not right for you, they can advise you on what you would need to do under a Chapter 13 repayment plan. This may involve asking you questions about your household, your income and expenses, your job, any previous bankruptcy filings, and tax payments.
Also, an attorney can advise you on the degree to which exemptions can cover your property. If exemptions do not cover everything, the attorney can help you weigh whether getting a discharge of qualifying debts would make the loss of your non-exempt assets worthwhile. They will carefully explore the scope of your assets and determine whether you have a substantial amount of non-dischargeable debt. (You should bear in mind that filing for bankruptcy may have benefits even if you do not get a full discharge of your debts. It can delay collection efforts and give you more time to pay your bills.) If you need to file bankruptcy immediately, an attorney can help you file the paperwork efficiently and thoroughly. You may need to get relief right away if you are facing a foreclosure, an eviction, or the loss of your car, or if you are having money garnished from your bank account or wages, among other situations.
Fees for Bankruptcy Attorneys
The fees that bankruptcy attorneys charge vary widely by region. In some relatively ordinary cases, you might be able to retain an attorney for a modest flat fee. However, you should be aware that a startlingly low fee may be too good to be true. This might be simply a base fee to which the attorney adds extra amounts based on various circumstances in a bankruptcy. Some attorneys engage in deceptive advertising, so you should make sure that you understand your fee before signing a representation agreement. At the other end of the spectrum, a fee that is unreasonably high can be reviewed by the bankruptcy court and potentially refunded to the trustee. In some states, a fee will be presumed reasonable if it falls within a certain range, although a court still has the authority to review a fee in this range. Fees in those states usually can go above the presumptively reasonable range, but the attorney will need to ask the court for approval, explaining why a higher fee is appropriate. The fee should not be the only basis for choosing an attorney. You will want to arrange an initial consultation with an attorney whom you are considering. This may be free or offered at minimal cost. While the attorney’s staff can handle much of the paperwork in a bankruptcy case, you should make sure that any legal advice and advocacy come from a licensed attorney. You can ask people whom you trust for referrals, but you should still explore the attorney’s qualifications to decide whether you are confident in them.
If you’re facing bankruptcy, it goes without saying that funds are tight, so you may be wondering if hiring an attorney to represent you is worth the cost. The answer is almost always yes, but it depends in part on the assets you’re trying to protect and whether you’ll be filing Chapter 7 or Chapter 13 bankruptcy. A bankruptcy attorney can help you size up your financial circumstances, including the types and amounts of the debts that are overwhelming you, and advise you about whether it’s wise to pursue bankruptcy at all. If bankruptcy is your best option, your attorney can help you decide if you should file it under Chapter 7 or Chapter 13 of the federal bankruptcy law. A Chapter 7 bankruptcy, also known as a liquidation bankruptcy, erases most debts but requires forfeiture of all but a small amount of assets. A Chapter 13 bankruptcy establishes a plan for making partial repayment to your creditors, and can allow you to keep certain assets, such as a home or car.
Once you decide which bankruptcy procedure to pursue, your attorney will guide you through the steps involved, including:
• Submitting a list of creditors to the court and scheduling court appearances.
• Directing you on where and how to complete a required pre-bankruptcy credit counseling session and a post-bankruptcy debt management course.
• Submitting required fees when filing documents with the court.
It’s possible for you to do some or all of these things yourself, but these steps will likely go more smoothly if they’re done on your behalf by an attorney familiar with deadlines, procedures and other formalities of the court. If you’re filing Chapter 7 bankruptcy, which can be wrapped up within a few months in the most straightforward cases, your attorney will likely charge a single flat fee for handling your case. Fees differ by lawyer, and can vary regionally even though federal bankruptcy procedures are the same everywhere in the U.S. You could pay as little as $500 to more than $2,000, but $1,200 to $1,500 is fairly typical. If your finances are particularly complicated, however, it’s possible your fee will be greater.
You’ll have to pay your attorney’s fee in its entirety before your lawyer files your case. That’s because all creditors (including your attorney) are legally barred from trying to collect money from you once you’ve filed Chapter 7. You’ll also be responsible for paying the court a filing fee ($338 for 2021), but you can apply to have the fee waived if you lack the means to pay it.
The process of filing Chapter 13 bankruptcy is more complicated and far lengthier than Chapter 7, and legal fees are significantly higher as a result. Chapter 13 typically involves creation of a payment plan that can take up to five years to complete. Fees of $2,000 to $5,000 are not unusual, and they can run significantly higher in complicated cases.
The good news about legal fees under Chapter 13 is that they often are rolled into the monthly payment plan devised to help repay your creditors, so you don’t have to come up with the money all at once, the way you do under Chapter 7. You will have to pay the court an upfront fee (currently $313) when filing Chapter 13 with the court.
Protection Against Excessive Attorney’s Fees
In every bankruptcy case, the court appoints an administrator known as a trustee, whose responsibilities include: inspecting all paperwork you submit for accuracy and completeness; reviewing your finances to determine which assets (if any) are eligible to be sold to help repay your creditors; conducting the sale of those assets; and, in Chapter 13 bankruptcy cases, collecting your monthly payments and distributing them among your creditors. Another duty of the trustee is to review the fees your attorney charges. If the trustee considers any fees excessive, they can order the attorney to refund them. If you think any of the fees are excessive, you can ask the trustee to review them.
How Bankruptcy Affects your Credit
A bankruptcy is a major negative event in your credit history, and it typically has a deep, lasting negative effect on your credit scores and your ability to get new credit. A Chapter 7 bankruptcy stays on your credit report for 10 years from the date you file bankruptcy, while a Chapter 13 bankruptcy remains for seven years after the filing date. A bankruptcy will have a negative effect on your credit scores as long as it appears on your credit report, but the severity of its impact on your scores will diminish over time. Some lenders refuse to consider applicants with bankruptcies on their credit reports, while others will consider applicants several years after a bankruptcy has been completed. The credit consequences of bankruptcy may be severe, but they are not permanent.
With time and persistence, it’s possible to rebuild your credit after bankruptcy and once again enjoy the ability to borrow and repay money responsibly. If you have a bankruptcy in your recent past, it’s a good idea to keep tabs of your credit scores and track your recovery progress.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506