Consumer bankruptcy is one of the most important American rights. Without it, citizens could be subjected to ruinous collections practices enforced by the courts. Unpayable judgments would prevent bankrupt households from becoming solvent, resulting in dire poverty and a dysfunctional U.S. economy.
For the insolvent, bankruptcy has many benefits. Certain debts can be wiped out completely, while exempt property can be retained. Bankruptcy petitioners may file for a Chapter 7 “fresh start” bankruptcy. Alternatively, under Chapter 13, they may restructure debts and retain property nonexempt under Chapter 7.
Most bankruptcy filers regret not having filed sooner. Often, the delay is rooted in misunderstanding of the bankruptcy code. Consulting with an attorney is the best way to determine if you qualify for bankruptcy, if the consequences of bankruptcy are worthwhile in view of your financial situation and what type of bankruptcy is best. In addition, bankruptcy attorneys handle the legal technicalities, ensuring that the bankruptcy is approved, and the maximum amount of property retained.
The Cons of Filing Bankruptcy Without a Lawyer
Bankruptcy laws have many facets, with different rules and procedures depending on the jurisdiction. Understanding all the nuances takes years of training. Pro se litigants often overlook important details of the filing process, miss key deadlines and/or leave out dischargeable debts. This can result in being stuck with dischargeable debts post-bankruptcy or an outright dismissal of the case.
What Bankruptcy Lawyers Do for Their Clients
Present Alternatives to Bankruptcy
Bankruptcy lawyers do not just assume filing is the best option. For some clients, a bankruptcy alternative, such as credit counseling, may make more sense. For example, if too many debts are non-dischargeable, negotiating with creditors may yield a better result.
Decide Which Type of Bankruptcy to File
Chapter 7 and Chapter 13 are very distinct. A Chapter 7 is designed for petitioners with overwhelming dischargeable debts who will not lose significant property in the liquidation. However, a Chapter 13 may be preferable if the petitioner has, for example, home equity far above the Chapter 7 exemption level.
This is where it gets down to the nitty-gritty. In preparing the case, the lawyer applies the means test, which determines if you qualify for a Chapter 7, Chapter 13 or both.
Valuing Your Property
This is where many pro se litigants err. Overvaluing property could trigger it to be seized despite it qualifying for exemption. On the other hand, undervaluing property could cause creditors or the court to question the veracity of statements in the petition. A lawyer knows how to value various items, such as an old T.V., jewelry, furniture, clothes, household items, vehicles, etc., which all must be accounted for in the petition.
Choose and Apply Exemptions
Each state has its own rules on what property qualifies as exempt. For example, most allow petitioners to keep all their clothing. However, if you have some unusually valuable apparel items, they might not qualify. Most will also allow you to keep home décor, such as wall pictures. However, a valuable fine art collection may not qualify for exemption under Chapter 7.
Complete the Schedules and Other Paperwork
Bankruptcy courts require reams of paperwork to verify petitioners’ financial status. The lawyer will collect all the necessary paperwork from you.
Schedules are forms that request data about all the petitioner’s debts, income, expenses and recent financial transactions. Certain financial transactions need to have been performed within a certain amount of time before filing. For example, excessive credit card purchases too close to the filing date could be a problem.
Handle Creditors That Violate the Automatic Stay or Discharge Order
Some creditors may try to collect during the automatic stay, which is enforced from the day you file until the case ends. This is illegal, and a lawyer will put a stop to it.
After receiving a successful bankruptcy discharge, some creditors try to argue they are still entitled to collect. If they are not, your lawyer will put a stop to it.
Modify a Chapter 13 Repayment Plan
Chapter 13 bankruptcies require you to make payments on a rigid schedule for three to five years. This is plenty of time for your circumstances to change. When they do, you are often eligible for a payment plan modification, which your lawyer can obtain in court.
Hiring an attorney to handle your bankruptcy case pays. Attorneys ensure their clients are afforded all their legal rights, which leaves them in the best possible financial position post-discharge. In addition, pro se litigants have a low record of case success.
Personal bankruptcy is often necessary. Though it may seem hard to pay for an attorney while insolvent, it’s important to note that fees are reasonable and many debts will be discharged, freeing up far more money than is needed to hire an attorney.
If you live in Massachusetts and are seeking debt relief, the bankruptcy attorneys and Hines Law Offices can help. We are a full-service personal bankruptcy firm with over 20 years’ experience. Our compassion, knowledge and expertise will help you gain control of your debt and finances with a new path in life. Call today for a Free consultation.