Do I Need a Bankruptcy Attorney?

What Does a Bankruptcy Attorney Do?

The word bankruptcy is so fraught with negative images that consumers tend to forget the real purpose behind filing: A) It provides protection from creditors; and B) It offers relief from some, or maybe even all debt obligations.

And that is exactly what a bankruptcy lawyer should do: Protect your assets from debt collectors and find a way to free you from financial responsibilities.

While it’s permissible to file for bankruptcy “pro se” – on your own – statistics say you will get a much happier result if you hire an attorney, regardless of whether you choose Chapter 7 or Chapter 13 bankruptcy.

According to Ed Flynn of the American Bankruptcy Institute, lawyers represented consumers in 91.5% of the 486,347 Chapter 7 cases filed in 2017. Lawyers had their clients’ debt discharged – meaning eliminated – in 96.2% of the cases.  Put another way: 428,097 people walked out of court debt free.

By contrast, people who represented themselves in Chapter 7 bankruptcy cases were successful just 66.7% of the time.

The stats are even more dramatic for consumers who chose Chapter 13 bankruptcy. Consumers representing themselves succeeded just 2.3% of the time. That number soared to a 41.5% success rate — debts were discharged after completing a repayment plan – when a lawyer represented a client in a Chapter 13 case.

So, if your financial status has soured and you want protection from creditors and relief from debt obligations, a bankruptcy lawyer could be your ticket to a fresh start.

What Should I Expect from a Bankruptcy Attorney?

Bankruptcy, like most legal matters, is a process and the safest route is to have an attorney guide you through the process if you want to succeed.

A good bankruptcy attorney will give you peace of mind if they provide at least these four things:

• An initial consultation – usually free! – to get an overview of your case
• Advice on options available, including what type of bankruptcy to file
• Completed paperwork necessary for filing bankruptcy
• Representation when the case goes to court.

The bankruptcy process begins with a 30-60 minute interview between you and a lawyer. If you are married, both of you should attend so that all questions can be answered honestly and accurately. The attorney will be able to lay out your options including the potential to file bankruptcy without a spouse.

Making guesses about how much you owe and who you owe it to is not a good idea. The attorney will want some paperwork that backs up your answers on how many assets you have and how much you owe. Don’t hold anything back if you want an honest and accurate assessment of your situation. The advice your attorney gives you is only as good as the information you provide.

When the attorney has enough documented evidence to evaluate your case, he should offer advice on how to proceed. A good attorney does not always recommend filing bankruptcy. It’s possible your problem could be resolved through less drastic means like debt settlement or maybe even a debt management program.

If your decision is to file bankruptcy, the next thing to expect from an attorney is filing paperwork with the court. Remember that the attorney is there to protect as many of your assets as he/she can, so chime in on what is most important to you.

The next step depends on the type of bankruptcy. In a Chapter 7 case, you would appear before a Chapter 7 trustee for a review of your bankruptcy petition. In most cases, your lawyer has done all of the heavy lifting up front. By providing thorough and complete schedules along with back-up documentation to the trustee, these meetings are normally painless when you use an attorney.

In a Chapter 13 case, things can get tricky. Not only must you meet with the Chapter 13 trustee, but you must present a Chapter 13 Plan which will be accepted by the Court. This is the part where most people struggle when filing without a lawyer. Your Chapter 13 Plan must meet all requirements in the Bankruptcy Code to be “confirmed” by the court.

Do I Need a Bankruptcy Attorney?

Consumers may choose whether to hire an attorney or represent themselves in filing bankruptcy, but as the numbers cited above from the American Bankruptcy Institute clearly demonstrate, hiring an attorney is a huge advantage.

The math on this subject is overwhelming:

• Only one in 25 consumers using an attorney is denied a discharge when filing Chapter 7. One out of three who files on their own, do not receive a discharge.
• Only about one in 50 consumers filing for themselves in Chapter 13, receives a discharge. Hire a lawyer and your chance for success is better than four-out-of-10.

The reasons are fairly obvious. Bankruptcy is a complex subject. Creditors want to get paid by consumers who say they don’t have the money. Lawyers on both sides are trying to convince judges that their client is right.

If you are not experienced in filing legal documents or arguing your case persuasively, you could lose on ridiculously simple mistakes. An experienced attorney knows what papers must be filed and what deadlines must be met. An experienced attorney knows the judges involved and what arguments they must make to get the result.

Not only that, completing the paperwork incorrectly can have disastrous results. It’s entirely possible that the Chapter 7 trustee can sell your house because of a paperwork error! Those types of mistakes do not typically occur when using an attorney, but occur frequently for people filing on their own.

That is why hiring an attorney has a much higher success rate than attempts to file on your own.

Can a Consumer Seriously Consider Doing This Pro Se?

If you have a great deal of time, patience and commitment – not to mention an understanding of legal proceedings and language – it is possible to file for bankruptcy pro se (on your own) and be successful.

It is not advisable, but it is possible.

Bankruptcy cases are tried in federal courts and that creates a problem right away. To file a case, you need to complete and file your petition in a certain way or it will never get on a judge’s docket.

There is the matter of filing all paperwork necessary for either Chapter 7 or Chapter 13 bankruptcies. Excluding even one document can result in your bankruptcy case being dismissed.

The U.S. Court System has made the process a little easier by furnishing a fillable PDF form that can be used in presenting a Chapter 13 filing. Eventually, they expect to have all necessary forms available online and that presumably will make it easier for pro se filers to handle filing their own case. But even this doesn’t solve every problem. The paperwork being available is only one Issue. You have to know how to fill it out correctly.

Then there is the matter of arguing your case before a judge, who knows the law, procedures and remedies for situations and could choose to dismiss your case at any time if you don’t follow those.

So, yes, you can consider filing a bankruptcy case yourself, but know that you’re doing so at your own risk.

Signs That You Need a Bankruptcy Lawyer

Financial distress rarely happens overnight or unexpectedly. It’s usually a gradual process with several flare warnings going up that things are deteriorating.

When warnings are ignored, your finances can go up in smoke and it’s too late to do anything about it other than declare bankruptcy.

Some of the obvious signs that bankruptcy might be in your future include:

• You only make minimum monthly payments on overdue bills
• Your credit cards are maxed out and debt is growing, not shrinking each month
• You use credit cards to pay everyday expenses like groceries, rent or utilities
• You’re paying overdraft fees each month
• Collection agencies are calling your house day and night
• Creditors are suing you or threatening to sue over your unpaid debts
• You don’t qualify for debt-relief programs like debt management or debt consolidation loans
• A job loss, divorce or medical setback turns your finances upside down

Bankruptcy is not usually the first option for debt resolution, but can be a good solution in many cases. Of course there are some downsides. It can damage your credit for anywhere from 7-10 years and be an obstacle toward getting security clearances.

However, if you can’t resolve your problems in less than five years, bankruptcy is a viable option.

How Much Do Bankruptcy Lawyers Charge?

Lawyer fees for bankruptcy vary depending on which form you choose, how complex your case is and where you are geographically.

The standard rate for a Chapter 7 bankruptcy is $1,500 and $3,500 for Chapter 13. Other bankruptcy costs include a filing fee ($338 for Chapter 7; $313 for Chapter 13); and fees for credit counseling and financial management courses, which both cost from $10 to $100.

» Related: Finding an Affordable Bankruptcy Attorney