Do I Need to Hire a Bankruptcy Attorney
Deciding to file for bankruptcy protection is a difficult decision and should not be taken lightly. It involves completing a lot of forms and schedules, filing them with the federal court and subjecting yourself and all of your property to the control of a bankruptcy trustee and judge. While the process is often described in simple terms and may seem very straightforward, make no mistake, it is a complicated legal process with many details, timelines and pitfalls. The cost of even an honest mistake can be significant and can lead to extremely bad results, such as the loss of your discharge or possibly even criminal prosecution. An experienced bankruptcy attorney will help you navigate the process and ensure that you are successful in obtaining your fresh start.
Hiring a bankruptcy attorney does come with costs. Attorneys charge fees for the work they perform, and place demands upon you to ensure that your case is fully and properly prepared. This cost is minimal, however, when compared to the value you receive in ensuring that your case is prepared accurately and prosecuted fully, ensuring that you receive the maximum benefits possible provided by the Bankruptcy Code.
There are several areas where having an experienced bankruptcy attorney will benefit you, but none is more important than the initial consultation. Most bankruptcy attorneys will offer a free or low-cost initial consultation to gather details about your financial situation and advise as to the best course of action, which may not be filing for bankruptcy protection. Just having your options explained to you by an expert in the field is invaluable, advising on what chapters you are eligible for and what makes the most sense based on your situation. I have received too many calls from individuals who filed their own cases, usually Chapter 7 cases where there was unprotected equity in a home or other asset, where the trustee is seeking to sell the asset and the individual is trying desperately to save it. Had they met with me or another experienced bankruptcy attorney, they never would have been in that case. The attorney will also advise as to what you can expect from the process, which will immediately take a lot of fear and stress away from you.
Once you have consulted an attorney, assuming you have elected to retain them, then the protection of the process will start immediately. Not only will your attorney advise you as to all of the information and documents required to properly prepare your case and guide you to complete your required courses, but they will also start dealing with your creditors. You will be advised to refer any creditors harassing you to the attorney, with many attorneys providing you with a short script to read to creditors when they call you. Once the creditor speaks to the attorney, most will not contact you again, protecting you until the case is filed and the Automatic Stay of Bankruptcy goes into effect.
The attorney will draft all of the forms, schedules, disclosures and, in the case of a Chapter 13, the plan of reorganization, ensuring that they are complete, accurate and, maybe most importantly, what they expected from the initial consultation. When an individual comes in for an initial consultation, they are usually extremely stressed out and will inadvertently make statements about or forget to disclose items that substantially impact the case. This is understandable and, since nothing has been filed with the court yet, there is time for your attorney to address these items and pivot your case if necessary. The attorney will review the bankruptcy petition (and plan) with you, advise you as to any potential risks or objections to the process and make any last minute updates necessary. They will then file your petition with the court. This may seem simple, but the timing of the filing can have a substantial impact on the case and your attorney will apply the appropriate strategy.
Once the case if filed, it is the attorney who will manage the vast majority of communications with the court, trustee and creditors. You, being under the protection of the Automatic Stay of Bankruptcy and your attorney, have little to do until your Section 341 Meeting of Creditors. At the 341 Meeting, you will have to face your trustee (and potentially some creditors or the U.S. Trustee), but your attorney will be next to you to address any issues that may arise, which are rare. The attorney will also ensure that reaffirmation agreements with creditors are received, executed and filed timely and they will ensure that you complete your second required course timely, ensuring that you receive a timely discharge. If an issue arises, your attorney is there to explain it to you and advise you of the appropriate course of action.
In a Chapter 7 case, the attorney will guide you to your discharge. If there are further benefits to be had, such as prosecuting an adversary to discharge your student loan debt or redeeming an underwater financed vehicle that you want to keep, the attorney will guide you through the process, handling all of the legal work involved and bringing you to a successful outcome. If an objection arises, from either a creditor or the U.S. Trustee, the attorney will guide you through it, all the while being the primary person in contact with the opposing party.
In a Chapter 13 case, the attorney will stay with you for the entirety of the Chapter 13 plan. These plans generally last three to five years and life rarely remains static for that long, so the attorney is there to address any changes in your circumstances that could affect your successful completion of the case. From filing motions to modify your plan when your financial situation changes to defending motions to dismiss, the attorney will assess your situation and keep you on the right path. Again, the attorney will take action if there are further benefits to be gained in your case. Often these include student loan discharge adversaries or seeking mortgage modifications, with the goal being to put you in the best position to succeed once you obtain your discharge.
Focusing on the negative is not the purpose of this information, but it would be negligent not to mention some of the very serious repercussions of making a mistake in this process.
The most common mistake, as referenced above, is filing for the wrong chapter of bankruptcy. Too often we see pro se filers in a Chapter 7, losing assets and potentially losing their discharge, when they should have been in a Chapter 13 the entire time (or not in bankruptcy at all). On the other hand, we see pro se debtors struggling to get a Chapter 13 case confirmed and working when they never should have been in a repayment plan to begin with. Next is the failure to disclose. Whether it is not listing an asset because “they want to keep that out of the bankruptcy” or failing to list a source of income because “that doesn’t really count, right?”, these failures in disclosure are taken very seriously by the Bankruptcy Code and its participants. The primary tools of bankruptcy, the Automatic Stay and the Discharge, are exceptionally powerful. The trade being made is that you are expected to provide complete and accurate information, no exceptions. The third is a failure to maximize exemptions. Pro se debtors schedule all of their assets accurately, but lose property because they do not realize that there is an exemption available to protect some or all of the value of these assets. Once filed, if the exemption is not claimed appropriately, the trustee has an uninhibited right to liquidate the unprotected asset and they will, as that is their job.
The direct repercussion of these mistakes range from unfortunate to brutal. The trustee in bankruptcy may liquidate non-exempt assets that could have been protected or, in a Chapter 13, require you to pay more to your creditors than you otherwise would have had to. You case can be dismissed for failure to make a good faith effort in your disclosures or for proposing a plan that is not feasible. A failure to disclose an asset can lead to the loss of that asset, or worse the denial of your discharge, or even worse, if the trustee and court believe that your failure to disclose was intentional, a criminal prosecution. It is unfortunate, but we read every couple of weeks about a debtor being prosecuted for an intentional failure to disclose an asset. Poor timing in the filing of the case can lead to creditors or the U.S. Trustee prosecuting an adversary to determine that certain debts are not to be discharged or, again worse, that you are not entitled to a discharge based on your circumstances. None of these things should occur, and generally they do not when you are represented by an experienced bankruptcy attorney, however we see them arise in court with too much frequency.
Your bankruptcy attorney should be your ultimate “phone a friend” option when you are going through the bankruptcy process. They are an expert who is on call to answer your questions and talk you through your various options. The attorney has an ethical obligation to ensure that they are always working in your, not their, best interests and truly experienced bankruptcy attorneys take this obligation very seriously (as those who do not are not practicing in this field for very long). Most attorneys, including me, handle a case with the standard of “the only stupid question is the one that you have that you do not call me and ask”. They are there to be your advocate, expert and guiding hand and are well worth their cost.
