Bankruptcy is a court order-imposed legal process many individuals and business owners consider when they cannot pay their debts. Often, the debtor initiates the process and receives help from a bankruptcy lawyer to navigate the often-complicated filing procedure.
While you might be confident in your decision to file for bankruptcy, that doesn’t mean you know how it works or your rights and responsibilities. Hiring a bankruptcy lawyer can be the right decision to ensure you’re well-informed, but consider asking these questions first to be sure you’ve chosen the right one for your needs.
Bankruptcy Related Questions
Should I File For Bankruptcy?
A common question Garner bankruptcy lawyers are asked during initial consultations is whether bankruptcy is the right decision to make. Bankruptcy can be life-changing, and people want to be sure they have no other options before considering it. If they believe it’s the right call after learning about your situation, they might recommend Chapter 7 or Chapter 13 bankruptcy. The best bankruptcy lawyers will clearly discuss what each of those bankruptcy types means and how to start bankruptcy proceedings.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is under Title 11 in the US bankruptcy code and describes liquidating non-exempt assets to pay creditors. It’s also known as straight or liquidation bankruptcy. Once the proceeds of the liquidation are exhausted, all remaining qualified debt is discharged.
There are strict eligibility criteria for filing a Chapter 7 bankruptcy, including not having filed one in the eight years prior and passing a means test. There are also several steps in the filing process, including undergoing credit counseling, filing a petition to the court, appointing an unbiased trustee to oversee the process, and reviewing your assets and finances.
Once these steps have been undertaken, the remaining debts are discharged. However, some debts, such as alimony and child support, unpaid taxes like tax liens, and obligations relating to malicious or wilful injury to others, can’t be discharged.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also known as a wage earner’s plan, is a debt adjustment option to help people repay all or some of their debts. With the help of bankruptcy lawyers, individuals create a repayment plan with payment installments for creditors over a three to five-year period.
There can be many benefits associated with Chapter 13 bankruptcy compared to Chapter 7, such as saving homes from foreclosure, rescheduling secured debts and protecting third parties liable with the debtor on consumer debts.
Many people can be eligible for Chapter 13 bankruptcy, such as individuals and self-employed people operating unincorporated businesses. Most eligibility requirements are set around the total of unsecured and secured debts being less than $2,750,000.
What Information Do I Need To File For Bankruptcy?
When filing for bankruptcy on your own or with the help of a lawyer, you’ll need to gather documentation for the courts to make an informed decision regarding your eligibility. Whether you file for Chapter 7 or Chapter 13 bankruptcy, you’ll need to provide some of the following information.
- Tax returns or tax transcripts – Two years for Chapter 7 and four years for Chapter 13
- Proof of income – Six months of pay stubs before bankruptcy, two W-2s, and proof of other income, such as rental properties, Social Security, and disability payments
- Retirement and bank account statements
- Vehicle information – Registration, insurance, and proof of value
- Real estate information – The property’s fair market value and mortgage statements
- Identification – Valid ID with a photo, proof of your social security number
- Evidence of other costs – Alimony, child support, other expenses
What Are The Advantages And Disadvantages Of Filing For Bankruptcy
Asking about the pros and cons of filing for bankruptcy can be important when you’re unsure if this is the right decision for you to make. If the pros outweigh the cons in your unique situation, your lawyer might recommend going ahead with the filing process. If the cons outweigh the pros, they might suggest other options, such as negotiating with creditors.
There can be many advantages associated with bankruptcy, such as being free of old tax liabilities, preventing lenders from aggressive collection methods, being able to start fresh, and still being able to borrow money from lenders who will lend to ‘bad risk’ customers.
However, there can be as many disadvantages to consider, such as losing your current credit cards, lowering your credit score, potentially losing luxury possessions, and having your name in public court records.
How Much Do Bankruptcy Lawyers Cost?
When you’re seeking assistance from a bankruptcy lawyer, it’s clear that you’re having finance-related problems. Knowing how much you can expect to pay for bankruptcy lawyer services before you proceed can mean you’ve got time to plan how to cover their fees.
How much you pay can depend on your lawyer’s experience level and where you live. Ask how much you’ll be paying in federal filing and attorney’s fees and whether there are any related costs you’ll need to cover. Filing fees can be as low as $313, while attorney fees typically start from $1,450.
Don’t be afraid to ask about available flexible payment arrangements. Some lawyers allow you to pay off your bill, while others require lump-sum payments for services provided over the duration of the bankruptcy filing process.
How Long Does It Take To File For Bankruptcy?
After struggling with your financial situation for a long time, you might be ready for it to all be over so you can start again. As a result, it’s only natural to be curious about how long it takes to be declared bankrupt.
It can take between four and six months from filing for Chapter 7 bankruptcy to being discharged of your debts. However, everyone’s cases are unique, which means it can sometimes take more or less time.
As Chapter 13 bankruptcy is a payment plan, it can take three to five years to be free of your financial obligations to creditors. However, once your petition has been submitted, the process can take between one and five months to complete.
Navigating the bankruptcy filing process can be daunting, especially if you’ve never been in this situation before. If you’re currently weighing up the pros and cons of filing for bankruptcy, consider meeting with a bankruptcy lawyer and asking some of these questions above. The more informed you are, the more confidence you might have in the actions you take.