Unlike a business bankruptcy, an individual debtor doesn’t need an attorney to file for bankruptcy relief. But it’s not always a good idea to do so. Whether filing on your own will make sense will likely depend on:
• whether you’re filing for Chapter 7 or Chapter 13 bankruptcy
• the amount of your income and property
• the complexity of the matter, and
• whether you’re comfortable researching and handling your case.
If you have a simple Chapter 7, you will have a better chance of completing your case without a bankruptcy lawyer. The hallmarks of a simple Chapter 7 would include a:
• household income below your state’s median income level
• little or no property
• no recent property transfers or payments to preferred creditors (learn how the trustee can recover the property for your creditors), and
• your creditors aren’t likely to dispute a debt.
But keep in mind that even filing a simple Chapter 7 bankruptcy requires a fair amount of time and research on your part. If you want to complete your case, obtain a discharge, and not put any of your property at risk, you have to:
• accurately fill out several bankruptcy forms and schedules
• learn how bankruptcy laws work
• research your state’s exemptions, and
• follow all the rules and procedures necessary to complete the bankruptcy process.
It’s usually best for any bankruptcy filer to hire an attorney. That said, as discussed above, individuals can represent themselves in the right circumstances. It just depends on the case and the comfort level of the person. By contrast, even though a business can wind down in Chapter 7 or reorganize in Chapter 11, a company can’t represent itself. An attorney is necessary whenever a business files for bankruptcy.
You’re Filing for Chapter 13
Chapter 13 bankruptcy is a powerful financial tool that can allow you to:
• catch up on your missed mortgage or car loan payments
• eliminate unsecured junior liens (such as a second mortgage) from your home through lien stripping, or
• reduce the principal balance or interest rate on your car loan with a cram down.
But Chapter 13 bankruptcy is considerably more complicated and labor-intensive than Chapter 7. If you want the court to confirm (approve) your Chapter 13 bankruptcy, you must propose a feasible repayment plan, which is challenging to do without legal knowledge and the software used by bankruptcy lawyers. Further, if you wish to pay less on your house or car by stripping a second mortgage or cramming down a car loan, you’ll need to file a motion or adversary proceeding with the court, which also isn’t an easy task. While you might be able to handle a simple Chapter 7 bankruptcy on your own, it makes sense to hire an attorney for more complicated cases. For instance, it’s a good idea to hire an attorney if you:
• have a significant amount of income that might potentially disqualify you from filing a Chapter 7 (learn about the Chapter 7 bankruptcy means test)
• have a lot of assets that might be at risk
• own a business
• have debts that might not be dischargeable in bankruptcy
• recently transferred valuable assets out of your name, or
• have creditors that might challenge your discharge.
Of course, if you don’t believe you can navigate the bankruptcy process, or if you aren’t comfortable with it, it’s probably best to hire a bankruptcy lawyer.
How to Find a Good Bankruptcy Attorney
When seeking legal representation in bankruptcy, you’ll want to look for an experienced bankruptcy lawyer, not a general practitioner. Not only does bankruptcy require understanding how many principles interrelate, making a mistake can be costly. Most lawyers won’t accept a bankruptcy matter unless they practice bankruptcy law regularly.
Here are some suggestions for finding the best bankruptcy lawyer for your job.
Personal Referrals
Knowing someone who had a good experience with a bankruptcy lawyer is often your best source. Call that lawyer first. Your lawyer might know a good bankruptcy lawyer, as well. Or, if a family member or a friend used a lawyer in a non-bankruptcy matter, ask that lawyer if they would recommend a bankruptcy attorney.
Group Legal Plans
If you’re a member of a plan that provides free or low-cost legal assistance and the plan covers bankruptcies, make that your first stop in looking for a lawyer.
Lawyer-Referral Panels
Most county bar associations will give you the names of bankruptcy attorneys who practice in your area. Keep in mind that bar associations doesn’t screen the lawyers. It’s up to you to check out the credentials and experience of the person to whom the bar association refers you.
Online Directories
You can also find lists of bankruptcy lawyers online. A useful directory will provide information about the lawyer, such as the types of cases they handle, their philosophy on representing clients, and typical fees.
Legal Aid
Legal Aid offices offer legal assistance in many areas. A few offices do bankruptcies, although most do not. The federal Legal Services Corporation partially funds Legal Aid, and it’s intended for low-income people. It’s more likely for a Chapter 7 filer to find help. Few Chapter 13 bankruptcy filers will qualify.
Legal Clinics
Many law schools sponsor legal clinics and provide free legal advice to consumers. Some legal clinics have the same income requirements as Legal Aid; others offer free services to low- and moderate-income people.
While having a bankruptcy lawyer on your side will almost always be better than filing yourself, not all debtors can afford legal counsel. If it isn’t a possibility, you might consider:
• getting help from a local free clinic or legal aid society
• finding a pro bono attorney to accept your case at a free or reduced rate, or
• paying most of the attorneys’ fees through a Chapter 13 repayment plan.
The Process
You should follow these steps when you file your bankruptcy case:
• Determine Whether Your Income Meets the Means Test: When considering whether to file bankruptcy without a lawyer, the first step is to conduct a “Means Test” to determine whether you qualify for Chapter 7 bankruptcy. The federal government provides a test form. You can also find simplified versions of the test online. You’ll have to answer questions regarding:
Your monthly income
Your debts (to see if they are dischargeable) and nonexempt assets
The number of people in your household
The bankruptcy process may be simple enough to handle on your own if the following are met:
You own few assets
Your household income is below your state’s median
You haven’t been accused of fraud
• Obtain Your Credit Reports and Complete Credit Counseling: The next step is to obtain credit reports from all three credit bureaus. You’ll need all three reports because creditors don’t typically report to every bureau. If you fail to report a debt, it won’t be discharged in bankruptcy. Next, you’ll have to complete a credit counseling and financial literacy course. The U.S. Trustee Program has a list of approved credit education agencies on its site.
• Fill Out the Paperwork: Filling out the official bankruptcy forms is generally the most complicated and time-consuming task if you choose to file bankruptcy without a lawyer. Download the bankruptcy forms package to save the time and stress involved in tracking down the necessary materials. The packages are inexpensive and provide you with all the forms you need to file for Chapter 7 bankruptcy in your state. Once you complete the forms, attach the relevant documents and submit the paperwork with the filing fee either in person or by mail. It’s important that you promptly respond to any correspondence from the bankruptcy trustee. Failure to do so can get your case dismissed.
• Attend the Meeting of Creditors: You’ll have to attend your “Meeting of Creditors” on the scheduled date. Although your creditors won’t actually be present, the trustee will be and will ask you a number of standard questions about your case. Be sure to answer truthfully and accurately.
• Take a Personal Financial Management Instruction Course: Finally, you must complete a post-filing Personal Financial Management Instruction Course within 45 days of your meeting of creditors. Take a look at the U.S. Trustee Program’s site to find an approved course near you. After you’ve completed the course, the last step is to wait to hear from the bankruptcy court whether your debts have been discharged.
You will at least need an understanding of the legal issues before filing the bankruptcy petition. How hard a case will be will also depend on other factors including:
• The type of bankruptcy
• How complicated your case is
• Your current financial situation
• Whether you have other obligations like student loans, car loans, child support, and alimony
Even though your case is relatively uncomplicated, a bankruptcy case requires you to fill out extensive paperwork and have a good knowledge of the Bankruptcy Code. Thus, it may be in your best interest to at least have an initial consultation with an attorney to make sure you are on the right course. In general, you need to at least pay a filing fee and the credit counseling and financial management course fees to finalize your bankruptcy petition. But if you have no money, you can ask for a fee waiver (in Chapter 7 cases) or ask the bankruptcy judge to roll the payment in your repayment plan (in Chapter 13 cases).
Chapter 13 Bankruptcies and Other Situations
While in some cases you can file bankruptcy without a lawyer, there are exceptions, depending on the type of bankruptcy. Some examples include:
• If your corporation or partnership is facing bankruptcy, you’ll need a bankruptcy lawyer.
• If you fail the Means Test because your income is too great, you may have to file a Chapter 13 bankruptcy rather than a Chapter 7. In that case, you can still file for bankruptcy without a lawyer, but it will be more difficult. That’s because Chapter 13 cases are much more complicated than Chapter 7 bankruptcies.
In addition to filling out the needed paperwork, you’ll have to create a repayment plan detailing how you plan to repay your creditors. As with Chapter 7 cases, downloading a bankruptcy forms package will help you stay organized by providing you with all the paperwork you need to file.
Bankruptcy Petition Preparer
A bankruptcy petition preparer is any person or business, other than a lawyer or someone who works for a lawyer that charges a fee to prepare bankruptcy documents. Under your direction and control, the bankruptcy petition preparer generates bankruptcy forms for you to file either by typing them or inputting information into a bankruptcy software program. Because bankruptcy petition preparers are not attorneys, they can’t provide legal advice or represent you in bankruptcy court. Specifically, they can’t tell you which type of bankruptcy to file, tell you not to list certain debts, tell you not to list certain assets, or tell you what property to exempt. In essence, you must understand what debts your bankruptcy will discharge, what will happen to your property in the bankruptcy, and what laws should be used to exempt your property from being taken for the benefit of your creditors. Also, you must file the bankruptcy papers yourself and represent yourself in court. In other words, you are responsible for your case. You act as your attorney and use the bankruptcy petition preparer as a typing service that transposes the information you give them onto the official forms.
A good bankruptcy petition preparer will have up-to-date bankruptcy computer software that will generate the documents quickly and relatively easily. And most bankruptcy petition preparers charge low fees, especially compared to lawyers.
Bankruptcy law requires bankruptcy petition preparers to follow these business practices:
• provide a written contract defining their services and fees
• provide written disclosures summarizing the different kinds of bankruptcy and the associated procedures
• identify themselves (in their marketing materials) as debt relief agencies providing services under the federal bankruptcy code
• not charge an unreasonable fee (fees generally range from $100 to $200)
• not collect or handle the bankruptcy filing fees or other court fees (you must do that yourself)
• file a fee disclosure statement with the court (stating how much they have charged you for services)
• include their name and social security or tax identification number on the documents they prepare, and
• not use, or advertise with, the word “legal” or any similar term.
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
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