People hire a bankruptcy lawyer to avoid the effort of learning and applying bankruptcy law. Most find the cost relatively reasonable when taking into account the amount saved by "discharging" or erasing debt.
Of course, individuals have the right to file for bankruptcy without an attorney. And, if your case is straightforward, representing yourself might save you money. However, consider hiring a lawyer if your Chapter 7 case involves valuable assets or anytime you file for Chapter 13 bankruptcy. In these situations, filing without an attorney could cost more than you'd save going it alone.
Why Is a Personal Bankruptcy Attorney Worth the Cost?
The most significant benefit to you is that an experienced attorney quickly recognizes any potential problem that could arise during your case and plans accordingly. Here's a sampling of the value a qualified bankruptcy attorney will bring.
Using an Attorney for Bankruptcy Planning:
- 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 serve different purposes. For instance, Chapter 7 will quickly wipe out a lot of debt, 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 recommend a course to help you achieve those goals. For more information, see Should I File for Chapter 7 or Chapter 13 Bankruptcy?)
Using an Attorney for Bankruptcy Preparation:
- 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 many assets as possible.
- Determine discharge of debts. Some debts don't get wiped out in bankruptcy, and others go away only if certain conditions get met. Your attorney will explain which debts will get eliminated and which will survive your case.
How Many People File Without Hiring a Lawyer for a Bankruptcy Case?
Most people don't file pro se or pro per (without a lawyer). In 2015, 9.2% of Chapter 7 and 8.5% of Chapter 13 filers didn't hire a lawyer, and the success rate was dismal.
For instance, the bankruptcy court "confirmed" or approved a repayment plan in fewer than 2% of pro se Chapter 13 filers' cases in California's Central District. (Repayment plan confirmation is the first hurdle you must clear in a Chapter 13 case.) By comparison, 60% of debtors represented by an attorney had plans successfully confirmed by the court.
What Will a Bankruptcy Lawyer Help Do?
You'll be in good hands after hiring a competent local bankruptcy attorney. Here are a few of the things you can expect a bankruptcy lawyer to do.
- 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 anticipate case needs. For instance, your lawyer will know what to disclose, how to value your assets, what constitutes income, which expenses are "reasonable and necessary," and the correct tax returns to supply.
- Guide you through the bankruptcy case. Your attorney will explain and prepare you for what's ahead. You'll learn the role of the bankruptcy trustee and the judge, the steps 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 the information is correct as far as you know. 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 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 case filing), 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 let you pay less and keep your house or car. In Chapter 13 bankruptcy, your attorney will negotiate balances, collateral value (property that secures debt payment), and interest rate terms to lower your monthly payment.
- Modify a Chapter 13 repayment plan. Sometimes circumstances change during your Chapter 13 case. Your attorney can ask the court to make temporary or permanent adjustments to the terms of your Chapter 13 plan or request an early hardship discharge.
Will a Bankruptcy Lawyer Help Me Rebuild Credit After Bankruptcy?
All in all, attorneys are good at ensuring your case gets through the process smoothly, 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 to help you take advantage of the offers you will receive after your case ends.
What Can I Do If I Can't Afford a Bankruptcy Lawyer?
Many people believe they can't afford to hire a bankruptcy attorney to represent them. However, after researching the options and the procedures involved in preparing a case, it's common for bankruptcy filers to find a way. You'll find helpful suggestions in Options If You Can't Afford a Chapter 7 Bankruptcy Lawyer.
Need More Bankruptcy Help?
Did you know Nolo has made the law easy for over fifty years? It's true—and we want to ensure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!
We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.