Introduction to The Benefits of an Attorney for Bankruptcy
The American legal system is a complicated process, but it is not impossible to understand. Attorneys spend years in school learning about how the legal system works for both criminal and civil cases. The schooling requirements for attorneys is so extensive because attorneys are expected to have a very encompassing understanding of the legal system, even if they only every practice in one area. For the average person, understanding the legal system is completely attainable – with enough work. There are plenty of circumstances where an individual going through a legal battle may decide to represent themselves, and may do so commendably. That will depend heavily on what the legal circumstances are and the knowledge of the individual. Some areas will be much harder to defend yourself against, and in those cases it is probably best to hire an attorney to ensure that all of your rights are being properly protected and advocated for. Bankruptcy is one of those areas where investing in an attorney will pay off in the long run.
Becoming an Attorney
Even though attorney tend to get a bad reputation, a lot of hard work and dedication goes into becoming an attorney – and also maintaining the license to remain an attorney. In order to become an attorney, there are lot of steps that need to be taken before obtain your Juris Doctor degree. First of all, before starting law school, the individual will need to have obtained a four-year degree in any subject.[i] Then, if admitted, law school will be another three years to obtain the degree.[ii] Then after graduation, students will study for the bar exam and hopefully pass. Then finally, after a minimum of seven years of higher education – the individual can practice law. Even though many people may have poor views about attorneys, each and every actively licensed attorney has spent years dedicating him or herself to the profession.
So when it comes to filing for bankruptcy, it is a good idea to hire an attorney. Bankruptcy is a very complicated and detail intensive area of the law. An attorney will be able to provide extensive knowledge in the area and ensure that everything is taken care of, every step of the way. It truly is a full time job because of all the deadlines and piles of paperwork required for every step. Some areas of law only requirement paperwork on occasion and a few appearances – that is not bankruptcy. Bankruptcy is a very long process, no matter the chapter you chose to file.
The Process of Chapter 7 Bankruptcy
Filing for Chapter 7 bankruptcy is one of the more common chapters for individuals. The entire process is on average about fourth months long – but it is a very busy four months.[iii] The price range is also between $300 and $500, depending on the state.[iv] As far as the price range for bankruptcy attorneys, those again will depend on the state, but could range between $1,200 and $2,500.[v] This might seem like a lot of money, especially to a person who is going through a bankruptcy process. However, having peace of mind that your bankruptcy proceeding is going through seamlessly is worth the money to some people. And some law firms may do a reduced rate or offer payment plans for clients.
Now, filing for Chapter 7 bankruptcy is not as simple as bringing documents to the courthouse and asking the clerk to file those documents. Each individual who wishes to begin the bankruptcy process must first be eligible to seek bankruptcy.[vi] While a person can read what allows them to be eligible for bankruptcy – that material can be incredibly dense and often times it is easier to have some one break it down for you. There is less of a chance that you will miss something along the way if you have a professional from the field assisting you. Generally speaking, those eligibility requirements include looking into the past of the debtor to see if they have filed for bankruptcy (and received a discharge of debts) within the past six to eight years.[vii] If the answer is yes – then the individual will not qualify. Next, if the individual has not received a discharge in within that time period, then the individual must not have an income that is above the median income for a family of that individual’s size in that state.[viii] Looking over that data could be confusing, so again, an attorney would be there to look over your financial records for you and help make that determination. If the income of that individual is below the median, then the individual will be eligible to
begin the bankruptcy proceeding – if they decide to proceed.
Just because an individual is eligible for bankruptcy, does not mean they have to file. This is something that your bankruptcy attorney will discuss with you. Obviously if you file for bankruptcy and go through with the process, the attorney will benefit financially from this. However, a good attorney would ensure that they go over all the risks and benefits of filing for bankruptcy with their client. After all, the driving factors for attorneys should be based on the clients needs – not money. If you find a good enough attorney, they will have your needs at heart – not your wallet.
Next, if the individual decides to file for Chapter 7 bankruptcy, they will need to do a number of things before the proceeding even begins. As state previously, bankruptcy requires a LOT of paperwork and it is best if the individual or likely their attorney creates a great organization plan for that paperwork. The individual will want to gather all the relevant documents for their bankruptcy – including documents about the outstanding debts the individual has, credit card bills, loan statements, and all other documents relevant for that person.[ix] Collecting these documents are important because the bankruptcy court will require a lot of paperwork to be filled out, and having access to all this information will make the process move by much faster. That is another benefit of having an attorney – the individual may not need to even fill out the paperwork, the attorney or his staff may do that for them based off the financial information they provide.
The next major area of bankruptcy that hiring an attorney would prove beneficial for would be the liquidation process. With Chapter 7 bankruptcy, the court will assign a trustee to basically sell off all of the individual’s property that is not exempt.[x] Every state has a different set of exemptions for individuals filing for Chapter 7 bankruptcy.[xi] An attorney would be able to review the applicable statute and help the debtor determine which of their belongings will be safe from the sale and which will not. Another aspect of the liquidation process is dealing with the trustee on a regular basis. With an attorney in place, the individual filing Chapter 7 bankruptcy will have a go to person to handle any issues that may arise with the trustee. There may be items that could be sold but may not bring in a lot of value – even though that is a determination to be made by the trustee, the attorney could persuade the trustee to avoid sale. At the end of the day, the trustee decides what is actually worth selling, and with some persuading, the individual may be able to keep a family heirloom that has a lot of sentimental value.
The Process of Chapter 13 Bankruptcy
When it comes to filing for Chapter 13 bankruptcy, there are a lot of similarities with Chapter 7 bankruptcy but also a lot of differences. One major difference between the two chapters of bankruptcy is that many businesses file for Chapter 13 bankruptcy over Chapter 7 bankruptcy. For this reason, filing for bankruptcy becomes far more complicated. For starters, if there is more than one person in charge of the business – it may be sticky deciding who is going to be in charge of filing everything. At attorney would be a good neutral party to carry out the bankruptcy for the business.
Chapter 13 bankruptcy also requires a repayment plan, that must be approved by the bankruptcy court.[xii] This repayment plan will dictate how the business will repay debtors for the next three to fives years.[xiii] Because of how extensive this plan will be, it would be a good idea for an attorney to help create this plan to ensure the court does not reject it the first time. If the court rejects the repayment plan, it could take weeks to prepare a new plan by the business owners – while an attorney could have a fraction of that time.
During this repayment plan period, the business has the ability to stay operating – if they so chose. A business may want to just file for bankruptcy and wind down the business, but many businesses will want to remain open. Chapter 13 bankruptcy allows businesses to catch up with their finances and have a fresh start. An attorney could watch over this process and provide advice to ensure that the business will remain successful after the bankruptcy proceeding is complete.
Conclusion to The Benefits of Having an Attorney for your Bankruptcy Proceeding
Overall, even though hiring an attorney for any legal proceeding is not a requirement, it is often a huge relief to do so. Some legal proceedings are so complicated that even a person with a legal education may need to still research to understand – and that is someone who has gone through 7 years of schooling to become an attorney. Hiring an attorney can bring a lot of peace of mind to the very stressful legal process. This is especially true with filing for bankruptcy. There are so many details, so much paperwork, and so many deadlines that it is easy to forget something along the way. With an attorney, their job would be to ensure everything is taken care of … and on time. It will cost you more money to hire an attorney to do the work, but at least you will have peace of mind that the process is taken care of and in good hands.
[i] See Juris Doctor (JD) Legal Career Path (Accessed July 12, 2016) http://legalcareerpath.com/juris-doctor-j-d/
[iii] See A Chapter 7 Bankruptcy Overview. NOLO Legal Encyclopedia. (Accessed May 27, 2016). http://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-overview-29571.html
[v] See Average Bankruptcy Fees in Chapter 7 Bankruptcy NOLO Legal Encyclopedia (Accessed July 12, 2016) http://www.nolo.com/legal-encyclopedia/average-attorney-fees-chapter-7-bankruptcy.html
[vi] See A Chapter 7 Bankruptcy Overview. NOLO Legal Encyclopedia. (Accessed May 27, 2016). http://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-overview-29571.html
[viii] See Chapter 7 Bankruptcy – Who Can’t File? NOLO Legal Encyclopedia. (Accessed May 27, 2016). http://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-eligibility-29701.html
[ix] See Emily Co. 5 Steps to Take Before You File Bankruptcy. (Published Sept. 28, 2012). https://www.learnvest.com/knowledge-center/5-steps-to-take-before-you-file-bankruptcy/
[x] See Chapter 7 Bankruptcy – Who Can’t File? NOLO Legal Encyclopedia. (Accessed May 27, 2016). http://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy-eligibility-29701.html
[xii] See An Overview of Chapter 13 Bankruptcy. NOLO Legal Encyclopedia. (Accessed May 27, 2016). http://www.nolo.com/legal-encyclopedia/chapter-13-bankruptcy-overview-30099.html