Are you familiar with how bankruptcy works? Please take a moment to read about it in this guide and see how a bankruptcy lawyer might help you.
Bankruptcy happens a lot more often than most people realize. In just 2022, nearly 400,000 people filed for bankruptcy.
There are a lot of myths surrounding bankruptcy. It can get a bad rap, despite being one of the most effective ways for someone deep in debt to get a clean slate. One question people often ask, though, is this: do you need a bankruptcy lawyer during the process?
The answer is this: you’ll be glad you had one.
In this guide, we discuss what bankruptcy entails. Then, we’ll talk about the ways that you stand to benefit from hiring a bankruptcy lawyer.
What Is Bankruptcy?
Bankruptcy is pretty straightforward. Once a person has reached the point where they can no longer pay their debts, they declare bankruptcy in court. The court can then free a person from certain debts–but not without a catch.
Professionals will then take inventory of all of your assets. With the exception of exempted assets, such as necessary things like clothing or a car, almost everything is on the table. This might include furniture, personal electronic devices, and even intangible assets like retirement savings or alimony.
The court will then liquidate these assets, i.e. sell them off to convert them into cash. From there, they re-distribute this cash in equal amounts to your creditors. At that point, you have no further legal obligation to pay off this debt.
From there, you get the “fresh start” that bankruptcy can afford you. It doesn’t necessarily need to be a negative thing. What matters most is that you learn from the experience and improve your financial wellness.
Different Types of Bankruptcy
Bankruptcy is not a monolith. Depending on your situation, you will need to file with the specific chapter of bankruptcy that applies to you.
In total, there are six types of bankruptcy. For our purposes, though, we will only be covering the most common: Chapter 7 and Chapter 13. Let’s discuss these two kinds in greater detail.
Chapter 7 Bankruptcy
When people imagine bankruptcy, this is likely the first thing that comes to mind. In this type of bankruptcy, the court liquidates most of your assets, likely including your home. That said, this is the fastest option to file for bankruptcy with.
First, the court must determine if you are eligible through a means test. This means verifying that you are truly in over your head with debt. You must not have filed for bankruptcy recently, either.
Only certain debts are eligible, such as the following:
- Medical bills
- Personal loans
- Credit card debt
Bankruptcy is not a silver bullet. There are certain types of debt that are difficult or impossible to eliminate:
- Child support
- Back taxes
- Student loan debt
Chapter 13 Bankruptcy
Chapter 13 is a form of bankruptcy that is less aggressive. Rather than selling off all your assets to appease your creditors, think of it like that re-organization. In coordination with your debtors, you come up with a repayment plan that is more forgiving and realistic.
Over the course of 3 to 5 years, you will repay some or all of the debts with a new installment plan. Since this is income-dependent, you may not qualify for Chapter 13 if you are not earning enough.
Other requirements include that you must not have filed for Chapter 7 or Chapter 13 bankruptcy in recent years.
How Can a Bankruptcy Lawyer Help?
Like most things that involve the legal system, lawyers and attorneys are experts. Bankruptcy lawyers and bankruptcy attorneys can both be crucial aids in the process. We recommend hiring a bankruptcy lawyer for the following reasons.
Choosing Whether or Not to File
In some cases, you may believe you need bankruptcy. But in reality, there are better options that won’t wipe out your assets and tank your credit score. A lawyer can provide legal counsel on what you should do instead.
Choosing the Right Bankruptcy Option
As we’ve said, there are six types of bankruptcy. The one that works best for you won’t be the one that works best for somebody else. Hiring a bankruptcy attorney ensures that you file for the right one.
Helping You through the Bankruptcy Process
Even if bankruptcy is a way to start over, that doesn’t make the process any easier. This is especially the case if you are filing for Chapter 7, which requires you to liquidate assets. Many people get stripped to the bone, losing almost everything they hold dear to appease the creditors.
A bankruptcy lawyer can make the process go as smoothly as possible. They will keep you on track for all of your court-provided forms. They also help you to better assess your different kinds of debts, and eliminate or reduce most of them.
Most importantly, a bankruptcy attorney can help you hold onto as much as possible. As we’ve said, there are exemptions concerning what creditors can take, and what they cannot. Legal counsel can help you keep a hold on certain items that you would be loathe to part with.
Flat Fee Payment Options
The bankruptcy process can be long and drawn out. One common fear that people have when hiring a lawyer is how much it will cost them. If the lawyer works on an hourly basis, then a sufficiently long case could leave you in more debt–the opposite of where you wanted to be.
Rather than working on an hourly or contingency basis, some bankruptcy attorneys will accept a one-time, flat fee. This can help you to better plan your finances post-bankruptcy.
Get Representation With Johnson/Turner Legal
People often view bankruptcy with derision, despite this being an excellent way to wipe out overwhelming debt. That said, the process of bankruptcy is no walk in the park. A bankruptcy lawyer will be a vital aid in securing your assets and eliminating the most debt possible.
Johnson/Turner Legal can help you through the process of bankruptcy. Book a quick guidance call with us today.