Individuals filing for bankruptcy have the right to do so without an attorney. And, if your case is straightforward, representing yourself might save you attorneys' fees. However, it isn't always a good idea. If your Chapter 7 case involves valuable assets, or if you want to file for Chapter 13 bankruptcy, filing without an attorney could cost you more than you'd save going it alone.
Why a Bankruptcy Attorney Is Worth the Cost
The biggest benefit to you is that an experienced attorney quickly recognizes any potential hiccup that could arise during your case and will plan accordingly. Here's a sampling of the value a qualified consumer bankruptcy attorney will bring to the table.
- Consider alternatives to bankruptcy. Bankruptcy might not be the only way to achieve financial peace. If bankruptcy is not the best choice, your attorney will suggest an appropriate bankruptcy alternative.
- Decide which type of bankruptcy to file. Chapter 7 and Chapter 13 accomplish different goals and serve different purposes. For instance, Chapter 7 will wipe out a lot of debt in a short time, but it won't help you save a house if you're behind on your payments. Your attorney will carefully consider your wants and needs and will recommend a course to help you achieve those goals. (For more information, see Should I File for Chapter 7 or Chapter 13 Bankruptcy?)
- Apply the means test. The means test calculation indicates whether you qualify for a Chapter 7 bankruptcy or whether you can afford to make payments in a Chapter 13 case. An attorney will understand how to use any special circumstances you present.
- Value your property. Do you know how to value your dining room set or your 5-year-old TV? Your attorney will make sure that you disclose and value your assets realistically.
- Choose and apply exemptions. Every state has a separate exemption system used to keep property in bankruptcy. Your attorney will understand how to use the exemption rules to protect as much of your assets as possible.
- Determine Discharge of Debts. Some debts don't get wiped out (discharged) in bankruptcy. Others go away only if certain conditions get met. Your attorney will explain which debts will get eliminated and which will survive your case.
During Your Bankruptcy:
- Complete the schedules and other paperwork. You will file pages of financial data about your debts, income, expenses, assets, and recent financial transactions, all under penalty of perjury. Your attorney will know what you must disclose, how to value your assets, what constitutes income, which of your expenses are "reasonable and necessary," which tax returns to supply, and a host of other issues.
- Guide you through the bankruptcy case. Your attorney will explain and prepare you for what's ahead, like the role of the bankruptcy trustee and the judge, the steps you must take to qualify for a discharge, and what actions your creditors can take.
- Provide accurate and complete testimony. You must sign your bankruptcy paperwork under penalty of perjury, telling the court that as far as you know, the information is correct. At your meeting of creditors and anytime you're in court, you'll swear or affirm that you're telling the truth. Your attorney will be with you to ensure that your testimony is correct and complete.
- Handle creditors who violate the automatic stay. Some creditors just don't know when to quit collecting. If a creditor violates the automatic stay (the injunctive order that prohibits collection activity after the filing of the case), your attorney can demand compliance or ask the court to hold the creditor in contempt.
- Negotiate with your creditors. In Chapter 7 bankruptcy, your attorney can negotiate a reaffirmation agreement or a redemption with a secured creditor that will allow you to keep your house or car. In Chapter 13 bankruptcy, your attorney will negotiate with your creditors on payment terms, the value of collateral (property that secures payment of a debt), and interest rates to make your repayment plan affordable.
- Modify a Chapter 13 repayment plan. If circumstances change during your Chapter 13 case, your attorney can help you ask the court to make a temporary or permanent adjustment to the terms of your Chapter 13 plan or request an early discharge due to hardship.
Rebuilding Credit After Bankruptcy
All in all, attorneys are good at making sure that your case gets through the process smoothly, thereby allowing you to take full advantage of your fresh start. Even so, sometimes things occur afterward that need attention (although this is rare).
Your attorney can help resolve post-bankruptcy discharge violations if a creditor attempts to collect a debt that was wiped out by the bankruptcy. Also, many attorneys provide guidance on rebuilding credit. They'll give you handy tips that will help you take advantage of the offers you're bound to receive shortly after your case comes to a close.