In general, bankruptcy is a type of legal procedure that is used when a person or entity is seeking relief from certain kinds of debt. If granted, bankruptcy allows the person or entity filing to restructure, reorganize, and/or reduce their debts in ways that make it more manageable to meet their financial obligations.
According to the U.S. Bankruptcy Code, which is the primary source of law that governs the bankruptcy process in the United States, there are many different chapters of bankruptcy that a person or entity can file for, including:
- Chapter 7;
- Chapter 9;
- Chapter 11;
- Chapter 12;
- Chapter 13; and
- Chapter 15.
This article will primarily focus on Chapter 7 and Chapter 13 bankruptcy since those are the main chapters that are used when a person files for personal bankruptcy.
Personal bankruptcy, also known as consumer bankruptcy, refers to a situation wherein an individual can no longer pay off the debts they incurred due to personal spending habits or needs. In most instances, a person will file for personal bankruptcy when they need to eliminate their debts and get a fresh financial start.
While this may sound like an appealing concept, bankruptcy should only ever be used as a last resort because it can have long-lasting consequences. On the other hand, there are also plenty of advantages to filing for personal bankruptcy, such as if you need to prevent your house from being foreclosed on by a mortgage lender or stop a utilities company from shutting off your electricity.
If you are in an overwhelming amount of debt and believe you may be eligible to file for personal bankruptcy, you should consult with a local bankruptcy lawyer first to find out which type of bankruptcy chapter may best suit your needs (if any) before you file.
What Issues Do Personal Bankruptcy Attorneys Handle?
A personal bankruptcy attorney may handle lots of different types of bankruptcy issues and thus will likely be able to provide their clients with a wide variety of legal services. When an individual hires a personal bankruptcy attorney to assist them with their bankruptcy issues, the attorney might be expected to handle some of the following tasks:
- Provide helpful legal advice to their clients about the various filing options they have and which chapter of bankruptcy may be best suited for their particular situation. For instance, a personal bankruptcy attorney can explain the dissimilarities between a Chapter 7 and a Chapter 13 bankruptcy proceeding.
- Conduct legal research on the bankruptcy laws that are applicable to a client’s claim and may affect the outcome of their bankruptcy case.
- Determine whether there might be underlying issues with the filing, such as mistakes, clerical errors, or misinformation. A personal bankruptcy attorney will also address possible issues with fraud or misrepresentation with their client before it gets to court, which if caught in time, can help the client from developing a criminal record.
- Provide legal representation on behalf of the client in bankruptcy court, at the 341 meeting of the creditors, and during oral interviews with various parties.
- Oversee and manage many crucial administrative tasks related to a client’s case, such as:
- Drafting, reviewing, and filing necessary legal documents with the court;
- Compiling, organizing, and reviewing various forms of supporting evidence;
- Maintaining files for the client (e.g., bankruptcy repayment plan for Chapter 13 bankruptcy case); and
- Amending paperwork in a client’s bankruptcy case or switching to another chapter of bankruptcy if it is more appropriate for the situation at hand.
In addition, it is important to note that the process for filing for personal or consumer bankruptcy is much different than the one used for when a commercial business files for bankruptcy. As such, an entity who needs to file for bankruptcy will most likely need to hire a bankruptcy attorney who specializes in commercial bankruptcy filings (e.g., Chapter 11 bankruptcy).
Advice for Hiring a Personal Bankruptcy Attorney
Choosing the right personal bankruptcy attorney can be beneficial for a person’s case. Filing for personal bankruptcy will involve combing through tons of personal and financial documents, so a person should be comfortable with and trust the attorney whom they decide to hire.
Some other tips for hiring a personal bankruptcy attorney include:
- Conducting research on a personal bankruptcy attorney’s educational background, legal specialty, and state bar licensing information (e.g., are they in good standing?) prior to hiring a particular attorney.
- Communicating in an honest and open manner about a person’s current financial situation as well as informing the attorney about whether a person has filed for bankruptcy before in the past.
- Asking a personal bankruptcy attorney questions about anything that a person does not understand about their bankruptcy case or legal obligations after a judge has approved their bankruptcy filing.
- Filling in the attorney who is hired about any additional legal issues that they should have notice of, such as tax issues, liens against a person’s property, and non-dischargeable debt like student loans.
- Letting the personal bankruptcy attorney know if there are also any business bankruptcy matters that need to be handled simultaneously (e.g., if a person is also the owner of a small business).
- Speaking up about any property concerns or other issues that a personal bankruptcy attorney may be able to help resolve, as opposed to keeping quiet about the issues and causing the person to feel more stressed than they would if they had told their attorney.
Basically, a person should be aware that the more honest and open they are about their financial situation, the more helpful their personal bankruptcy attorney can be in return.
Keeping the above tips in mind when searching for the right personal bankruptcy attorney can also ensure that a specific attorney will be a good match for the individual. Additionally, some of this information will also help prospective clients in avoiding conflicts of interests when hiring their attorney.
Do I Need a Lawyer for Help with Personal Bankruptcy Issues?
Determining whether to file for personal or consumer bankruptcy can be an extremely daunting task and is a decision that should not be made hastily or taken lightly since it can affect an individual’s financial situation for the rest of their life. A person who decides to file for personal bankruptcy should know that it involves a thorough and somewhat invasive evaluation of all of their property, assets, and finances.
Personal bankruptcy cases also require adhering to a strict legal process, paying meticulous attention to financial details, and having a strong understanding of both federal bankruptcy laws and state bankruptcy regulations, such as state exemption laws.
Thus, if you have any questions or need assistance with filing for consumer bankruptcy, then it may be in your best interest to consult with a local bankruptcy lawyer as soon as possible. An experienced bankruptcy lawyer can walk you through the process of filing for personal bankruptcy step by step and can answer any questions you may have along the way.
Your lawyer can also discuss the risks and benefits of filing for personal bankruptcy and can make sure that you choose the right chapter of bankruptcy when it comes time to file your legal paperwork. In addition, your lawyer can provide legal advice on the relevant bankruptcy laws and can determine which items of property may be exempt from the process under the laws in your state.
Finally, your lawyer can help you in reviewing and calculating all of your property, assets, and finances, along with your spouse’s should you choose to file for joint personal bankruptcy. Your lawyer will also be able to accompany you to your 341 meeting of the creditors and can provide legal representation before a bankruptcy law judge.