With the recession and unemployment still looming large in the United States, millions of Americans are having to contemplate filing for bankruptcy as an option. It is critical, though, that debtors think about this solution before acting upon the abstract idea.
Finding an Attorney
Prior to getting involved with formal bankruptcy proceedings, it is best for debtors to be prepared for what they may face. Almost certainly, readying oneself for bankruptcy court will involve representation by a bankruptcy attorney, who may be of considerable assistance in helping debtors prove their case. That said, unless a person gets a specific recommendation from a friend or some other referral, he or she may find a good lawyer is indeed hard to find.
In starting out the search for a bankruptcy attorney, it is logical to go to the biggest coalition of attorneys in the nation: the American Bar Association. With hundreds of thousands of card-carrying members and local chapters across the United States, the chances of finding a trained professional in the area through the ABA as opposed to random searching is that much greater.
Just the same, searching through advertisements may yet be the way to go, especially if money for attorney’s fees is a concern. If quality must be sacrificed for the sake of funding, the debtor must do whatever he or she can to make sure practical differences are negligible and, more importantly, to make sure the services they encounter are helpful and legitimate. In other words, applicants should do a fair bit of comparison shopping before merely deciding upon a bankruptcy attorney out of convenience.
On the flip side, there are means by which petitioning debtors can have bankruptcy lawyers come to them. By placing their own classified ad over the Internet or through another medium, individuals may hear from lawyers who wish to take their case, perhaps even on a pro bono basis. In some forums, attorneys looking to represent the insolvent party may get into a bidding war and thus fight over the chance to be hired.
Bankruptcy Law Firms
With choosing a bankruptcy law firm, there is often a trade-off: larger firms may have a better amount of resources and name recognition to their credit, but smaller films may make up for shortcomings along these lines with the more personal attention they can give their clients and their years of experience specifically with bankruptcy. Irrespective of size, one tendency of bankruptcy law firms is to cater to those individuals with the most common circumstances in bankruptcy court.
Free Legal Services
Some low-cost or free “legal services” may indeed be scams that target the uninformed, trusting debtor. Whatever one’s circumstances and level of debt, in seeking relief individuals should be cautious about the reliability of their source before gathering information or signing a contract.
That said, for those who suffer from low income on top of their insolvency, there are legal options that won’t break the bank, so to speak. One such option is to solicit public assistance, not so much in terms of welfare or other financial aid programs, but non-profit state and Federal bankruptcy programs, such as the Legal Services Corporation, that specifically fund local agencies working to provide benefits for underprivileged applicants.
For some disadvantaged populations, such as the disabled and victims of abuse/disease, reduced rates for legal representation may also come into play. To a certain extent, this is representative of the larger aims of bankruptcy: to help people in need based on their varying circumstances.
Some bankruptcy lawyers as well as programs within public and private legal associations will even directly market their services to the common man. Many reputable bankruptcy attorneys will lend a helping hand to debtors in the event litigation is called for, offering their know-how and experience to petitioners pro bono, that is, for free.
Free Legal Information
For all intents and purposes, a licensed bankruptcy attorney is the best source of legal information available to debtors prior to formally submitting an application for protection under the Bankruptcy Code. However, while the above considerations of free legal representation may be a vital safeguard for the debtor in petitioning, accepting one’s services pro bono is realistically not a guarantee of quality. What’s more, debtors may not need an attorney just yet anyway, as they may still be at the stage when they are considering other avenues to relieving their debt. In this scenario, individuals may simply need free advice on bankruptcy, something which exists in abundance online and through other public channels.
One of the best resources for information-seekers in terms of the thoroughness and accuracy of the details they gather are the official pages for government and legal organizations. The U.S. Court website provides a wealth of information.
Much as filing for bankruptcy can be disadvantageous to parties in debt for the property/property value they might lose, foreclosure is almost universally inadvisable for debtors, as it will result in both the sale of their home and a potentially destructive effect on their credit report. If homeowners are facing the threat of foreclosure, they would be wise to solicit the services of a foreclosure attorney rather than some “quick fix” option they see in an advertisement. As their clients may be facing sufficient financial obligations, most notably delinquent mortgage payments prompting action by lenders, foreclosure attorneys will likely not be able to negotiate the preservation of both clients’ rights to their house and their ability to discharge all debts.
Just the same, foreclosure lawyers can be instrumental in securing a more preferable alternative to foreclosure on behalf of their clients, and noting the potentially severe consequences of a foreclosure sale, these alternatives are several. For one, debtors may wish to take out an additional mortgage, though this is a certified risk as the danger of foreclosure is directly related to the inability to meet regular mortgage payment deadlines. Foreclosure attorneys may also look to a revision of the terms of a loan, and thus, can be important intermediaries between borrowers and lenders in arguing for an extension of the length of a repayment period, a lower interest rate, or a temporary forbearance on payments so debtors have time to reassess their financial strategies.
Still, these routes may ultimately be too short-lived. Some choices with longer-lasting applications include resale of assets to the bank to offset debts (of course, with the bank’s full cooperation) or bankruptcy itself, specifically Chapter 13 reorganization that may permit debtor-homeowners to keep their residences.
According to Section 110 of Title 11 of the United States Code, debtors and legal representatives are not the only people who may fill out a petition on the debtor’s behalf. Noting the complexity of bankruptcy forms and the negative impact failure to complete them as specified might have, bankruptcy petition preparers are expressly granted this right, and imaginably, receive a fee for their troubles.
Whether or not a “bankruptcy petition preparer” is one individual (bankruptcy law allows for preparers to be either), all involved in assisting applicants complete this document must be indicated in writing on the form, and for individual preparers, they must make sure to sign both their name and address. As they are not permitted to submit the petition for the debtor, only to prepare it, preparers must send their work to the client and inform them of their function in all of this.
Debtors looking at the option of a bankruptcy petition preparer should take heart with the knowledge that these individuals’ exploits are overseen by qualified legal professionals, as well as the idea that Title 11 specifies maximum amounts of fees preparers can claim for services rendered to the insolvent party.
All the same, debtors who use bankruptcy petition preparers should note that they are only petition preparers and nothing more. Specifically, they may not give any specific legal advice to the people whose documents they type, and certainly may not profess otherwise. As Section 110 expressly points out, petition preparers may be charged with a crime if they lead the debtor to a decision in any way, such as instructing him/her/it on how to file their petition and under what chapter, how to cancel out debts through discharge.
Pro Se Bankruptcy Litigation
Despite stricter standards for declaring personal bankruptcy in the wake of the BAPCPA of 2005, bankruptcy filings have been on the rise in the United States for the past few years, and this includes incidences of pro se filings, wherein debtors seek to file and represent themselves in bankruptcy proceedings. Specifically when it comes to self-representation in bankruptcy court, this trend is quite a cause for concern amongst everyday people and bankruptcy experts alike.
Although this may be a subjective statement for some, as it applies to the laypeople of the United States, bankruptcy law is rather complex to approach without a lawyer proficient in these matters. If nothing else, an attorney can serve as somewhat of a “second opinion” for debtors in formulating a course of action. Right off the bat, pro se bankruptcy litigation involves a major time commitment for filers, as they must do their homework in reviewing the Bankruptcy Code and the FRBP. Additionally, the court may meet filers who fail to adhere to the letter of the law with stern condemnation for their actions.
In the event a debt/creditor is not reported with the statements included in the initial application, a debtor’s petition may be thrown out by a court judge right then and there. In fact, there are actually several causes by which parties who appear before the court can be refused relief by the judge.
More in Finding Bankruptcy Attorney
It is a difficult decision to file for bankruptcy, but a reliable bankruptcy attorney will help guide you through the process and determine your best option. In some cases, you may not lose any property at all and in others, you may be forced to repay creditors. You should seek out a bankruptcy attorney immediately when you believe bankruptcy is a viable option to prevent your financial situation form becoming worse or allowing collection actions to be taken against you.
How do I discharge my debt?
Only unsecured debt such as credit debt and medical expenses can be discharged and only during Chapter 7 bankruptcy. Chapter 7 is a personal bankruptcy option that requires the court to appoint a trustee to help you liquidate your assets to pay debts. You will not have any say in the matter except for the state and federal exemptions on property you are allowed to keep. Bankruptcy will impact the credit rating of the debtor for ten years.
How can I keep my property while repaying debt?
The only other typical bankruptcy option is a court supervised repayment plan that does not discharge you debt. This is a Chapter 13 filing. This filing is an automatic stay against creditors and prevents them from taking further action against the debtor. Like all other bankruptcy filings, the debtor will need to go to credit counseling, to determine if an automatic stay against collectors is necessary. If such action is necessary, then a debt repayment plan will be formulated, typically lasting 3 – 5 years that has the debtor repay all debts while the automatic stay is in place. No property is liquidated during this action.
What to prepare before meeting with the bankruptcy attorney
Be prepared to account for all of your debts, in addition to any assets you have, regardless of if they are secured or unsecured. You will need tax returns for the previous two years, and any other relevant personal finance documents. With this information, the bankruptcy attorney will be able to determine the best, applicable option for you.
You need to be honest about your financial situation and disclose all property and debt. Attempting to protect certain property from being liquidated or hiding valuable items to reduce the value of the estate will not be taken favorably by the court. Bankruptcy fraud is a serious criminal offense and will carry severe federal penalties or at the very least terminate your bankruptcy case.
What are bankruptcy exemptions?
Every state will have bankruptcy exemptions in addition to federal exemptions on property. This will sometimes (but not always) include a “Homestead” exemption on the property you live in, an exemption on retirement, pensions and public benefits, some personal property, a value in a motor vehicle and even a “wild card” exemption for miscellaneous property. Different states will have different distinctions on these exemptions, with some more lenient than others. Many states will also specifically exempt property from a business partnership. Consult with a local bankruptcy attorney for an explanation of your local bankruptcy exemptions.
What is an automatic stay?
An automatic stay prevents creditors from taking collection actions against you. Filing for bankruptcy provides an automatic stay while you, the court, your attorney and the court appointed trustee determine how you will emerge from bankruptcy, pay off your debts and take other actions mandated by the court. The automatic stay prevents the specter of losing property or being penalized from affecting your decisions through the process.
Where do I file for bankruptcy?
You will file for bankruptcy in the applicable United States Bankruptcy Court and the location will vary by the state. Many states will be broken up into districts serving different parts of the state and that is where you will file for bankruptcy.
Where to look for an attorney
You may use this website to find an attorney. To do so, use the search box on top of all pages. You may also compare attorneys and ask free questions by clicking Find Attorneys on top of the page.
The state or local bar association may have a directory or lawyer referral service that will be able to direct you to a qualified bankruptcy attorney. Larger states may have professional organizations of bankruptcy attorneys specific to that state.
Rates, Fees & Retainers
There will be fees to file for bankruptcy in US Bankruptcy Court. These fees are paid by the filer and have been recently increased for all filings. The bankruptcy attorney will have a record of how much you can expect to pay in court costs.
There will be additional fees for court services, such as audio recording. Fees can be waived or paid in installments at the discretion of the court.
You will be billed by the hour for the use of the lawyer’s time, unless indicated otherwise. This may not include flat legal service fees such as document preparation and filing. It is especially important to be aware of those fees.
A retainer fee is a non-refundable advance payment by the client that covers the cost of services provided by the lawyer. This payment is put into an account and billed whenever the lawyer performs services. This account may need to be refilled as the case continues. Although bankruptcy cases are not typically lengthy, retainer agreements can still be expensive, depending on the frequency by which the lawyer’s services are used.
You may choose to file for bankruptcy “pro se,” or without the assistance of a bankruptcy attorney. This is not advisable as you will risk losing non-exempt property or may make critical errors that will affect the outcome of your case. Free services may be available to low-income families as well as no-cost consultations. Payment plans can be arranged between clients and lawyers in case there is significant financial hardship for the client.
Interviewing your attorney
The following questions are important when interviewing your attorney:
What fees do I pay for retaining services?
Can I have that in writing?
What are my options?
Can I file for Chapter 13 bankruptcy and preserve my assets?
Can I contact you directly if there is a problem?
Can you allow me to examine your credentials?
What is your experience with bankruptcies, specifically my circumstances?
If you cannot handle my case, can you refer me to a lawyer that can?