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One of the most stressful and trying times is when you are in such a financial bind that you need to file personal bankruptcy. There are many unknowns and dark corners. Sure online research and topical articles are one thing, but more than not, they will only scare you and confuse you even more. As with many things that you can find online these days, you have to take bankruptcy information with a cautious eye; for one thing the information is geared towards a broad audience and is not specific to your unique and special circumstances. As a practicing bankruptcy attorney I can tell you that in my fifteen years and thousands of cases not one case is exactly alike. After you do some initial research, you should seek out a qualified competent bankruptcy attorney.
Lets explore what bankruptcy is in a general way, that way you can have an idea what the whole process is about. Then I will tell you what to look for in a qualified attorney that will meet your needs and give you self assurance.
What is Bankruptcy and How to Pick Your Bankruptcy Attorney
Technically, bankruptcy is Federal law, found at 11 U.S.C Sections 101 through 1532, with both the Federal Rules of Bankruptcy and Civil Procedure and each districts local rules that are applicable. The most common chapter by far is chapter 7, or Liquidation, followed by chapter 13, Adjustment of Debts of an Individual with Regular Income. The third most popular is chapter 11, Reorganization. In addition though you should be aware that most states too have laws on the books that resemble the federal laws of bankruptcy. Most of those state laws pertaining bankruptcy relate to the exemptions that you can take though, either the state specific exemptions or the federal exemptions. Reason being is that Congress is charged with making universal laws pertaining the bankruptcy. More on what an exemption is shortly.
Lets look at chapter 7 and 13 as they are the most likely chapters the average person or married couple will file. Some individuals with large personal debt and large asset holdings will need to do an individual chapter 11, but that is a bit beyond the scope here. And for purposes of this discussion I will not mention chapters 9, 12 or 15. Keep in mind there are chapters 1, 3 and 5 in the code as well. Chapters 1, 3 and 5 all deal with the administration of a case, and apply equally to chapter 7, 9, 12, 13 and 15.
With chapter 7, you are liquidating your estate for the benefit of creditors. But in reality you are not liquidating your estate, that is only what could happen, if your assets exceed what the law allows you to protect. The law was never written to leave you penny-less and asset-less. It is written with a “fresh start” in mind. Now that does not mean you will not have to sacrifice some things, but chances are that if you are in the situation where you are considering filing bankruptcy you are already in to deep and giving up some things is only natural. The chapter 7 process is also designed to be rather quick and efficient. On a whole the average case from time of filing to discharge of your debt will take about six months.
In a chapter 7 you are allowed to protect most if not all your assets to some extent, these are called exemptions. And you are allowed to take these exemptions to shield certain assets. Here are some common assets that the average household has, and will get to keep. Household goods and furnishings, such as furniture, clothes, pots, pans and the like. The exemption for these types of personal assets is quite generous. Anther big worry is retirement savings, and in general, you are able to keep your retirement accounts such as pensions or 401k’s up to and including one million dollars in value, yes that is right, if you have nine hundred thousand in your 401k and you file a chapter 7, that money is safe from liquidation and is out of reach of your creditors.
Chapter 13 is available to debtors who, for one reason or another, do not qualify for a chapter 7, but still want some sort of relief from their creditors. In a chapter 13 you are in a repayment plan lasting at least thirty-six months up to sixty. During that time frame you are paying back some or all of your debt based on, one, your ability to pay, and two, how many assets you wish to protect. A chapter 13 is really an underrated chapter. You can actually keep far more assets than in a chapter 7, and you can pay very little back on unsecured debt over the length of the case. If you are wary of a chapter 13, please contact an experienced attorney who can explain all the benefits tailored to your unique situation.
Chapter 13 is the chapter you need to file if you are behind on your mortgage, and you want to keep the house, and need some time to catch up the back payments. It is the right chapter to file if you are in risk of loosing a car and want to keep it. It is also a perfect chapter if you have back income tax debt owed to the federal government or your state. In a bankruptcy the Internal Revenue Service, and state revenue services must abide by the bankruptcy laws; they must stop all collection activities just like any other creditor. With this said, the following is of great value.
In all bankruptcy chapters you are shielded from your creditors collection activities immediately upon filing of the case. This is referred to the automatic stay, and is perhaps one of the most powerful tools the code has to offer. What does this mean? It means that if you are being sued for money by a creditor, that lawsuit has to stop, if your wages are being garnished, that garnishment has to stop! This is clear and there are no exceptions to this rule, it is very powerful. Creditors who willfully violate this powerful stay can be penalized harshly by the judge assigned to oversee your case, which can include the reimbursement of your attorney’s fees for fighting the action, or even damages.
Now that we have discussed the chapters available, and the general characteristics of each; exemptions and assets, and the automatic stay, lets look at the traits you are looking for in a qualified bankruptcy attorney. There are three categories that I believe exist, and traits that go with them, they are the dabblers in the low end, dabblers in the high end, and the solid competent attorneys in the middle.
As a practicing attorney in the field for 15 years I can tell you with certainty what you will get with each tier. The dabblers which I like to call them are not full fledged bankruptcy attorneys, they do to many other things, such as divorces, criminal law, wills, and so on. The high tier dabblers will quote you extremely high rates for the work that you need done, because they figure, hey if they are willing to pay me, then I will muddle through it. These attorneys tend to be at high end firms, with many attorneys, staff and practice areas, hence they need to charge a premium to cover all that overhead. With those high prices there are certainly no guarantees of success.
The dabblers at the low end have two forks, the dabblers that low ball their fees, and run a “bankruptcy mill” completely undercutting all other attorneys in the region in the hopes that volume will trump all. I have seen these, and they are a nightmare, the clients are the ones who are truly hurt in this situation. These attorneys see nothing more than dollar signs, and have very little concern for clients overall success down the road. And do not expect them to be there when the fat hits the flame. The other fork is the low fee attorneys who only do a case now and then but charge under the going rate of fees in the region. This is as detrimental as the high end firms overcharging, and the “bankruptcy mill” because all three of these types of attorneys are not fully immersed in the bankruptcy world, they do not know all the little things that add tremendous value to your success. They may not keep fully abreast of the new laws and changes that happen every month and year. They rarely attend any educational seminars, or workshops to keep their skills sharp.
What you are looking for in a qualified bankruptcy attorney are these following traits. One, they devote the vast majority of their practice to bankruptcy, or very similar areas, such as collections, or credit repair, which are all on the same type of practice plane. Two, they are up to date on the laws, even though the bankruptcy code was drastically amended in 2004, some are not as up to speed today as they should be, and solid attorney is fully versed in the new code, and should not stumble when asked questions about the new code. Three, their firm is the right size. You do not need to have a fifty attorney law firm to run a successful and vibrant bankruptcy law practice. The larger the firm, the more expensive it can get. You are looking for anywhere from a solo-practitioner to a five attorney outfit with a few support staff. Really that is all you need. The size of the firm will tie into the final trait that is extremely important. Their bed side manner, and your comfort level with them. Never underestimate your gut feelings, for example if you are walking into a law firms office and it has a grand entry way with imported Italian marble and priceless art you may feel intimidated and scared. Or on the flip side, if you are meeting your attorney out of the trunk of his car at a strip mall, you probably have the wrong attorney. Your attorney should make you feel relaxed, comfortable, and open. You want to feel comfortable telling your attorney everything, because they will need to know everything about you, and if that is not there, then you have the wrong fit. An experienced bankruptcy attorney will know that you are under a tremendous amount of stress, it could be hampering your health, your relationships, and so forth. They will set you at ease, and let you know that this is not the end, it really is the beginning. The beginning of a new financial start. A good attorney will have a well oiled system for making the process painless. One very important trait of a good attorney or firm is seeing the attorney, or if there are a couple, seeing them all before you meet them at court. That they explain to you what to expect at court and who the people that you are meeting will be. Experienced attorneys will know all of the other people involved in the process, and have good working relationships with both the court staff, and creditor attorneys. These are the truly experienced bankruptcy attorneys that you are looking for.
So, in sum, if you educate yourself on the basics of bankruptcy, the various chapters available, what you can and may not be able to keep, and what a good competitive price range is you are one your way to finding a well established competent bankruptcy practitioner who will guide you through this rough patch, and help you emerge on the other side with a stronger knowledge of your finances, the law, and the tools needed to move forward and regain your financial footing. Asking the right questions of your prospective attorney is an extremely important part of the process to insure that you find the right fit, best qualified and efficient attorney.