Wednesday, 9 January 2019

Do You Need a Lawyer Before Filing Bankruptcy

Do You Need a Lawyer Before Filing Bankruptcy

On today's article, I want to address the question of do you really need a lawyer to file for bankruptcy? And for good or for bad, Bankruptcy has this reputation of just being you fill out a few forms, you file with the court, and presto your debts all go away, and usually, it is not that simple, but the reality is sometimes it is that simple. And sometimes an attorney is not necessary which I know is probably not a popular opinion amongst other Bankruptcy lawyers

But the truth is there are certain cases where an attorney is really not necessary to file the bankruptcy, the tricks are, however being able to determine if you have a case that falls into that category. And the ironic thing is that's where the legal expertise comes in is an attorney could look at a case and say, "Yeah this is going to be" a straightforward case. 

  • I mean, the best way to go through the bankruptcy process is with counsel, but for a lot of people they just simply can't afford it. they just simply don't have the funds to be able to go through that process, because it is a fairly lengthy process, even a chapter 7 which is what most people file, you may be looking at least four to five-month process, so you have an attorney working for you during that time period, and there are costs associated with that. However, there are certain cases where it's not necessary
Let me tell you the areas where you need to be careful of if you're just looking to file your own bankruptcy and some of the areas where an attorney can be helpful.

Tips 1

First, is determining if you qualify to file for a chapter 7 like I said chapter 7 is the most common type of bankruptcy that people file. It's the debt that eliminates credit card debts, medical bills, those types of things, and it generally eliminates those completely.

However, back in 2005, they changed the bankruptcy code and now you have to qualify if you want to file a chapter 7. You have to pass what's known as the means test. What this is, is they look at your household size and income, and they compare that to the average income of some household size in your particular state.

For a family of two, you're going to qualify for chapter 7. If you don't, if you make more than that, then you may have to file a chapter 13 bankruptcy, which is a five-year process.

  • It's a big deal to be able to determine whether it's a chapter 7 or a chapter 13, where an attorney can help you is helping you to qualify if you have more than is allowed under the means test. If your income is too high that's compared to what's allowed under the means test. There are many different deductions an attorney can help you with to get below that median income and make it so you can qualify for a chapter 7.

It's one of these things where an attorney can be very helpful, it's also one of those things where if you are well below the average income for your household size, you're not really going to have to complete the means test. There are some documents that have to be filled out, but it's not something where you're going through and making deductions where an attorney would be necessary.

Tips 2

The second area where an attorney could be very helpful in chapter 7 bankruptcy, in particular, is determining if your assets are protected as you go through this process. When you file a chapter 7 bankruptcy, all of your non-exempt assets become the property of what's known as the bankruptcy estate, and what this is is the court can seize these non-exempt assets, sell them, and give the money to your creditors.

  • Most things are exempt when you go through that process: There's exemptions for like homes, the homestead exemption, most people are familiar with that, exemptions for cars, for household goods, wedding rings, retirement accounts. An attorney can be very helpful to make sure that you apply the correct exemption to that particular asset.

I can't tell you how many time I've sat through bankruptcy hearings where I hear someone who's representing themselves who's at risk of losing a very significant asset simply because they didn't apply for the right exemption.

Make sure that the assets that you do disclose, that they're not seized by the court and sold. 

Tips 3

Make sure that you apply for the correct exemptions, those can be a little bit tricky. But if your case is kind of just one of those straightforward cases where there's really not a lot of assets, again you qualify very easily because your income is below the median income, those are the types of situations where they can be straightforward enough with a little bit of guidance you can get the bankruptcy case filed and help avoid some of those overall costs associated with the bankruptcy filing.

That's something you can do that can help reduce some of the cost; it's not appropriate in a lot of cases, but in some cases, it just simply is. And it's a way to cut some of the costs associated with a bankruptcy filing and get the debt relief.

Hopefully, you find this article very helpful.

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