Filing for bankruptcy is a strategic move, if done right, it can get you out of your financial troubles. At times, it remains the only viable way forward. Individuals filing for bankruptcy have the right to do so without an attorney. And, if your case is straightforward, representing yourself might save you attorneys’ fees. However, things are not that straightforward always. The United States Bankruptcy Code defines six types of bankruptcy. But, when filing for bankruptcy as an individual, cases often fall under one of two types: Chapter 7 or Chapter 13. If your Chapter 7 case involves valuable assets, or if you want to file for Chapter 13 bankruptcy, filing without an attorney could cost you more than you’d save going it alone.
Chapter 7, also known as liquidation bankruptcy, wipes out debts. It’s designed for people who’ve been unable to make monthly debt payments. In a Chapter 7 case, a court-appointed trustee sells your assets (liquidates them) for cash and distributes the proceeds to your creditors. Some assets may be exempt, such as your car or household furnishings. Once completed, Chapter 7 releases you from responsibility for all the debts covered in the bankruptcy case.
In a Chapter 13 bankruptcy case, also called a wage earner’s or repayment plan, the court approves a repayment plan that lets you pay off debts over a three- to five-year period. After these debts are paid, you’re no longer responsible for them. This type of bankruptcy may allow you to keep property that you could lose in a Chapter 7 case, such as a house that’s in foreclosure. Notably, you must make all of your mortgage payments on time during the Chapter 13 payment plan.
How does bankruptcy affect assets and liabilities?
Depending on how you choose to declare bankruptcy, your assets and liabilities will be affected in different ways. In a Chapter 7 bankruptcy, many of your assets are up for liquidation to pay your creditors with the proceeds. In Chapter 13, you retain assets while working on a repayment plan for your outstanding debts.
See how bankruptcy affects assets and debts in the following debtee categories.
Small business owners
For small business owners with lots of personal debt, bankruptcy may help them continue to stay in business. It’s important to note that business debts aren’t alleviated with Chapter 7 or Chapter 13 unless you’re a sole proprietor and are personally responsible for them.
- Chapter 7: For sole proprietors, business and personal debts can be wiped out in a single bankruptcy case. You’re not obligated to meet income requirements if your business debt exceeds your personal debt.
- Chapter 13: Your business assets aren’t liquidated, but only your personal liability for business debts can be wiped out. The business remains responsible for its debts.
How to Find a Bankruptcy Attorney?
Look for specialized certification and a fee structure that takes complications of your bankruptcy case into account.
Your bankruptcy attorney will serve as your advocate and guide through what is a sometimes confusing process. Taking the time to contact a few lawyers and knowing what to look for can set you on the path toward successfully filing for bankruptcy.
When hiring an attorney to help you file your Chapter 7 or Chapter 13 bankruptcy case, look for expertise, a fair price and a communication style you’re comfortable with.
To find a local bankruptcy attorney, seek personal referrals from friends or family or your own attorney. You can also find bankruptcy attorneys through the National Association of Consumer Bankruptcy Attorneys.
Successfully navigating the bankruptcy code requires a deep knowledge of this area of law and the experience to know how to use it. A misfiled form or missed deadline could result in your case being thrown out. That’s why finding a specialist is important.
“Going with an attorney who is not specialized in bankruptcy can be very dangerous because they might not understand how to interpret this complicated area of the law,” says Dan LaBert, executive director of the NACBA. “You wouldn’t go to a dermatologist if you had a heart problem.”
Ask the lawyers you contact what specialized training or background they have. Those who have bankruptcy certification from the American Board of Certification have proven they know their way around the bankruptcy code better than your average attorney. An affiliation with NACBA is also a sign that an attorney is committed to advocating for people going through bankruptcy.
What To Expect From a Bankruptcy Lawyer?
If you hire an Oklahoma bankruptcy lawyer, here’s what to expect:
- A written agreement, or contract, between you and the lawyer. The agreement will likely include an overview of the lawyer’s work for you.
- A description of payment arrangements. For example, will the lawyer charge an hourly or a flat fee? How much will the fees be?
- Ongoing discussions. You’ll talk about how the lawyer is handling your case.
- An agreement. You’ll agree on how and how often the lawyer will update you about your case.
- A list of documents. The lawyer should provide you with a complete list of documents needed for your bankruptcy case.
Conclusion
Filing for bankruptcy is a significant decision. After all, a bankruptcy filing remains on your credit report for seven to 10 years, depending on the type of bankruptcy. Carefully consider whether you want to hire a bankruptcy lawyer or whether you want to go the more complicated route of handling it on your own. Regardless of which way you go, Chapter 7 or Chapter 13 bankruptcy can give you a fresh start in managing your money.