Since the beginning of the last decade, bankruptcy filings have continuously gone down. In 2018, for example, there were less than half as many filings as there were in 2010.
For the 12-month period that ended in June of 2019, there were 773,361 bankruptcy filings, down 0.3 percent from the previous year.
As a result of COVID-19, we may see a sharp increase in individuals seeking a bankruptcy attorney, though. Fortunately, Congress’s federal aid package includes a guarantee that individuals who file for bankruptcy for economic relief won’t have to forgo any stimulus checks to pay off their overdue bills.
Have you reached a point in your finances where you know that your only choice may be to file for bankruptcy?
To make sure you find the best lawyer for the job, keep reading for 9 tips on how to hire a bankruptcy attorney.
- Do Your Research
Depending on where you live, bankruptcy attorneys could be a dime a dozen, which is why you must do your research before you hire anyone.
If you feel comfortable approaching others or know someone who’s filed before, ask for recommendations. Many people, however, would rather keep their bankruptcy filing private, and that’s perfectly ok.
You can easily find a reputable attorney by conducting your search online. Look for their credentials, how long they’ve been in business, testimonials, and online presence to start.
- Talk to More Than One Attorney
Typically, Chapter 7 is the faster of the 2 personal bankruptcy filing types. They can take anywhere from 4 months to a year to complete. The average case usually takes around 4 months.
The point is that filing for bankruptcy requires time, paperwork, consistent communication, taking financial courses, going to court, amongst other things. It’s in your best interest to choose a personal bankruptcy attorney you click with.
Most bankruptcy lawyers offer a free consultation, either in person or on the phone. Given that you’ll spend at least the next 4 months in contact with that attorney, things will go more smoothly if you get along.
Some individuals just want a lawyer to be frank and get the job done. Others prefer a more personal approach and are more apt to value a professional who listens to their financial story first.
Neither characteristic means one lawyer is better than the other, but it’s crucial to choose to work with someone who helps you feel at ease, in whatever way that might be.
- Ask About Their Experience
Have you ever heard that saying that a jack of all trades is a master of no trades?
Bankruptcy is a complex area of the law. It requires experience and specialized skill, and a lawyer who takes on every case that walks through the door isn’t a specialist.
In other words, don’t go to a personal injury lawyer who also handles bankruptcy cases. The attorney you pick should be a bankruptcy lawyer first and foremost. That way, you can guarantee there’s no area of bankruptcy law they don’t know and understand.
Likewise, when they listen to you tell your story and get a closer look at your financials, they should be able to tell you their predictions based on the stacks of other cases like yours they’ve handled.
There’s nothing wrong with asking about experience. Even law firms use bankruptcy leads for attorneys to ensure they’re hiring experienced and reputable professionals to supplement their teams.
- Ask If They Foresee Any Potential Snags in Your Case
Any attorney for bankruptcy should be able to tell you if your case has red flags and the likelihood of those concerns becoming bigger issues.
For example, say you’ve recently taken out a large loan, and you used a portion of it for a big personal purchase, like a couch or a cruise. Your bankruptcy lawyer should let you know if they think that lender will be an issue, and how trustees typically handle those types of circumstances.
If you want to keep your house, it may be a situation where you have to file Chapter 13 instead of Chapter 7. Any reputable attorney should inform you of that possibility, and whether or not they think it’s something that could impact your case.
- Check for Reasonable Pricing
Before your consultations, find out what lawyers typically charge for Chapter 7 or Chapter 13 in your area. Cheaper isn’t necessarily better, but you don’t want someone who’ll take you for all your worth, either. After all, you’re filing for bankruptcy.
If your situation is simple, it might be in your best interest to find and take advantage of a good deal. Just remember that if you prefer a more personalized approach, it’ll probably cost more than those who advertise “cheap services.”
Bankruptcy lawyers can charge anywhere from under $1,000 to upwards of $3,000 for a more complicated Chapter 13 case.
More expensive doesn’t necessarily mean better, which is why it’s a good idea to “interview” a few lawyers before you choose who to hire.
Many attorneys, especially the more seasoned ones, require that you pay what you owe BEFORE they file. There are attorneys, however, who will work on a payment plan. That’s something you should discuss in your consultation.
- Choose Modern or Old School
Many older, more seasoned attorneys go about bankruptcy the old school way. They file all the necessary paperwork on actual paper. You can do the same yourself, in fact, and submit without an attorney, which is called filing pro se.
Seeking the advice of a qualified attorney is always recommended, however, as bankruptcy has long-term legal and financial outcomes.
The modern approach utilizes technology and submitting as much as possible electronically. Neither attorney is better than the other – it all depends on what you prefer.
Some attorneys are more comfortable crunching numbers without the need for absolute precision, whereas others will work with you every step of the way to ensure every answer or claim is exact to the cent.
It’s up to you which method you feel more comfortable with, and how involved you want to be.
- Pay Attention to Communication
Good bankruptcy lawyers are great communicators, but they also have other clients. Pay attention to how an attorney communicates and listens in your consultation.
Going forward, ask what their communication policies are.
Do they always respond to emails within 24 hours? Do they prefer email communication over the phone? If you call their office, will you get them or one of their associates?
Any reputable bankruptcy lawyer likely has at least one associate who helps with all their cases. There’s nothing wrong with you discussing your case with that person, too. What matters is that communication details are clearly outlined from the get-go so that neither one of you end up feeling frustrated or ignored.
- Pick an Attorney Who Can Litigate If Need Be
Depending on your situation, you could have debtors strike up a fuss at your attempt to file for bankruptcy.
Typically, this isn’t the case. If you took out a loan and spent money on a big trip, however, that lender could come back and demand that you pay at least a portion of what you owe.
If that happens, your lawyer will have to litigate on your behalf. While most bankruptcy lawyers perform their own litigation, not all of them do. Don’t bother hiring anyone who won’t be by your side in a dispute, if need be.
Likewise, if your attorney does foresee any potential bumps, ask what they charge for litigation down the road. If you end up having to file a Chapter 13 and pay back a portion of your debt, what will they cost?
Are they willing to discuss a payment play down the road if additional services are required?
- Ask Questions
Bankruptcy is a big deal. While there’s often no other option, it will affect your life in ways for years to come.
Don’t be afraid to ask questions of your attorney to ensure you’re making the best decision for your situation.
Ask them to lay it all out for you, including what you should expect every step of the way. How often will they email you with the next steps? How involved will they be with ensuring you don’t forget anything?
Ask about the aftermath too. What recommendations do they have for rebuilding credit after your case has been discharged? Does your attorney have examples of those who they helped filed who are now thriving and at peace with their financial decision?
Chapter 7 vs. Chapter 13
Chapter 7 and Chapter 13 bankruptcy are both methods for alleviating the weight of personal debt. They 2 are quite different, though, so it’s important to understand how before filing.
Chapter 7 Bankruptcy
Chapter 7 is a liquidation bankruptcy. It wipes out most unsecured debts such as personal loans, credit cards, and medical bills. In Chapter 7, these debts are wiped out without the need to pay back any balances through a repayment plan.
If you make too much money, however, you might have to file under Chapter 13 bankruptcy.
If you have any nonexempt property, the trustee on your case will sell it to pay back your creditors. If you don’t have anything to sell, then your creditors have to settle for nothing.
Chapter 7 is perfect for low-income debtors who have little or no assets.
Chapter 13 Bankruptcy
Chapter 13 caters to debtors with regular income, who do have some leftover every month to pay back at least some of their debts.
Most Chapter 13 debtors make too much to qualify for Chapter 7. Some who don’t make too much also choose to file Chapter 13 as it offers more options not available to those who file Chapter 7.
For example, if you want to keep all your property, you can opt to pay creditors an amount that equals nonexempt property. Then you pay back those debts through a repayment plan and get to keep your house, car, jewelry, and other assets.
Who Files for Chapter 13?
Chapter 13 works better for some debtors, especially those who:
- Don’t qualify for Chapter 7 but require debt relief
- Have non-dischargeable debts (like alimony or child support) that they want to pay off over a repayment plan
- Have fallen behind on car or house payments and want to get caught up while keeping their property
Talk to Your Lawyer About the Means Test
One of the first steps in determining whether or not an individual qualifies for bankruptcy is by performing a means test.
The test was designed to limit the use of Chapter 7 bankruptcy to only those who can’t pay their outstanding debts.
The test is performed by deducting specific monthly expenses from current monthly income over the last 6 months. What you arrive at is your disposable income. Typically, if it’s under $100 per month, then you qualify for Chapter 7.
Talk to your lawyer about whether or not you pass the means test, and if they foresee any issues in your case regardless.
An Excellent Bankruptcy Attorney Makes All the Difference
If you’re thinking about filing for bankruptcy, don’t hire the first attorney you find or speak to, unless of course, they fulfill all of your expectations and answer your questions accordingly.
The best bankruptcy attorney should put your mind at ease and provide you with a detailed account of how they think your case will go. Communication skills are a must, as bankruptcy requires certain information, paperwork, court dates, and coursework to be completed within specific time frames.
If you miss one item, your case could end up getting dismissed and closed, removing your automatic stay and holding you once again responsible for all your outstanding debts.
Bankruptcy takes time, so take your time finding and hiring the best bankruptcy attorney for the job.
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