How Bankruptcy Lawyers Help Individuals and Organizations in Court
The term bankruptcy has been stigmatized with a lot of wicked arguments which makes the people who need to file for bankruptcy feel ashamed. Bankruptcy lawyers help people detach from that stigma by presenting them the true image and opportunities that come with bankruptcy. Every other person in the US is stressed about the rising debts and is considering filing for bankruptcy. Annually around 30% of US citizens opt for bankruptcy, giving rise to a new generation of bankruptcy attorneys. This article will help you understand all that needs to be learned about bankruptcy and the lawyers that deal with it.
The Beginning of The Bankruptcy Law in the US
Bankruptcy means not having enough resources to pay off your debts, for instance, the inability to pay mortgages, student loans, or credit bills. With more than one million people filing for bankruptcy every year in the US, the US Constitution has shaped several bankruptcy laws to facilitate US citizens. Out of all those who file for bankruptcy, the majority get discharged and gain the exemptions available for each type of bankruptcy. Those who are unable to get discharged seek support from lawyers that minimize their loss by making suitable deals with the creditors.
Bankruptcy law is a branch of the US legal system that deals with the organizations and individuals who are filing for bankruptcy and provides suitable possibilities for those who are unable to pay off their debts. Bankruptcy lawyers are the experts of bankruptcy law and they guide people on how to file for bankruptcy, which type of bankruptcy to file for, and how it progresses. These lawyers know and advise people about all the possibilities and the consequences of each type of bankruptcy.
The birth of the bankruptcy law in the US was during the early nineteenth century, which was followed by several amendments and repetitions in the bankruptcy law. The first-ever bankruptcy law in the US Constitution was established in 1800 which was revised in 1803 due to huge corruption cases in the country. In 1841, the US Constitution passed a new bankruptcy law which was the second bankruptcy law of the country, this law unlike the one in 1800 allowed individuals to file for bankruptcy voluntarily. After the Civil War, the US legal system gave birth to the third bankruptcy law in 1967 to deal with the financial instability and the economical failure that resulted from the war. From 1967 to 1938 there had been numerous changes in the bankruptcy laws, every now and then some laws would be amended or repealed. Several bills were passed during that period too until finally in 1978, the Bankruptcy Reform Act took place and it has been used to govern bankruptcy cases since then.
Becoming A Bankruptcy Lawyer
Bankruptcy lawyers are trained in assisting individuals and corporations in filing for bankruptcies as well as guiding them about the step-by-step process of bankruptcy. When people declare themselves bankrupt or if the court announces it, the bankruptcy lawyers present broad legal possibilities. Each type of bankruptcy has its pros and cons and each type applies to a certain category of people, all that knowledge is transferred to people through such lawyers.
The role and the demand of bankruptcy attorneys have increased multifold during the current wave of the pandemic. More and more people are looking to hire bankruptcy lawyers to get legal advice about their debts. Becoming a bankruptcy lawyer requires a set of excellent qualities, and skills, along with a legal academic qualification.
In the US multiple law schools are providing professional legal training and experience to young graduates. The applicant must be competent to secure a position in a reputable college due to tough competition in this field. The fresh graduates aiming to be successful bankruptcy lawyers have to get enrolled in a four-year J.D program. Most of the law colleges in the US like Columbia offer professional legal training in all fields of law after the completion of a J.D degree. One can join different legal internships offered by renowned law firms and giant organizations to gain experience in the field. To be a practicing bankruptcy lawyer, the law graduates have to pass the state bar exam, which enables them to start the legal practice at the state level. Different examinations have to be passed to get the bankruptcy license and other legal certifications that help the law graduates in joining the list of successful bankruptcy lawyers.
Bankruptcy lawyers cannot rely on just formal legal education and licensing, some built-in and learned capabilities are necessary to be the best in the field of law. A good bankruptcy lawyer must have strong interpersonal abilities and communication skills to thrive in this field. He/she must be able to interact with the clients as well as the jury in a polite yet professional manner. The bankruptcy attorneys must have a strong analytical outlook on the legal matters to investigate them appropriately.
They must have the skills to read, write and research for the case to understand it better and help the client win. Another important skill that helps a bankruptcy attorney make his/her name is the ability to negotiate while staying within the legal limits. Negotiation is the most crucial aspect of bankruptcy cases as the assets of the client are at stake if the lawyer lacks the negotiation skills.
The salary of a bankruptcy lawyer is not fixed, how much salary a bankruptcy attorney gets depends significantly on the nature of their workplace. For instance, these types of lawyers are found in finance companies, insurance agencies, banks, giant corporations, private law firms, and legal departments of the government sectors.
The starting income and the average salary for each of these sectors vary a lot, along with the skills of the bankruptcy attorneys in those sectors. Normally, the pay of a bankruptcy attorney starts from nearly $50,000 and goes as high as $115,000, but these figures keep on changing as we move from one state to another. The highest-paid bankruptcy lawyers are typically those that work in first-class private law firms.
What can You Expect from the Bankruptcy Lawyers?
When people decide to hire a bankruptcy lawyer they have some expectations from them in their mind. Some of those expectations are improper but most of those expectations include exactly what a bankruptcy lawyer is supposed to offer. Here are the four correct expectations people have when appointing a bankruptcy lawyer:
Guidance on the Type Of Bankruptcy
The most important task that bankruptcy lawyers perform is to choose the type of bankruptcy for their clients according to the eligibility of the client. There are different kinds of bankruptcies, not all of which are suitable for every client. When a person or an organization hires a bankruptcy lawyer, they expect the lawyer to guide them about the right bankruptcy choice for their case. For example, if the client is a farmer, the bankruptcy lawyer will help the client file for a chapter 12 bankruptcy.
Compilation of All the Legal Paperwork
A common man is not able to fill, gather and compile all the legal paperwork without the help of a bankruptcy lawyer. The bankruptcy lawyers, as soon as they are hired, are expected to fill out the legal documents for the clients. They are also supposed to file for the bankruptcy case of their client or at least supervise the clients in doing so. The tasks of official signatures on the paperwork and preparing the legal agreements are done by the bankruptcy attorneys who have sufficient knowledge for this.
Representation in the Court
The bankruptcy lawyers represent their clients in the court hearing and trials if the case reaches that stage. They collect the evidence and gather enough information to convince the jury in your favor and present all the data in court on your behalf. Having a lawyer with outstanding communication and interpersonal skills increases the chances of winning the case as he/she can better represent you in the court. The bankruptcy attorneys are expected to answer all the questions regarding your case on your behalf so that they can form a strong argument and save as much of your assets as possible.
Legal Advice And Consultation
The bankruptcy lawyers are expected to provide an initial consultation about the case after the first meeting with the client. They are supposed to provide legal advice to their clients about what kind of bankruptcy they should file for and the consequences of each type. Bankruptcy attorneys are obliged to guide their clients about every step they take during bankruptcy cases. Clients can rely on bankruptcy lawyers for getting the best solutions for their assets and debt in form of the legal consultation and planning.
Mistakes People Make When Choosing Bankruptcy Lawyers
Having a bankruptcy lawyer by your side lowers the risk of your bankruptcy case going out of hand, which is why it is extremely important to choose your bankruptcy lawyer wisely. Here are the top mistakes people make when choosing a bankruptcy lawyer:
Hiring The Cheapest Attorney Available
It is not a surprise that bankrupt people will choose not to spend money on anything, not even a lawyer who can take them out of that mess. Thinking that they are saving money by hiring the cheapest available bankruptcy lawyer, people end up losing lots of their resources because with cheap lawyers the chances of winning a case are slim. A lawyer that charges less also has less knowledge and fewer skills which is why you should never focus on hiring a cheap lawyer.
Hiring the First Lawyer You Find
You cannot appoint the first lawyer you meet for your bankruptcy case, because bankruptcy is a delicate matter that can change the lives of people. When people randomly choose a lawyer they found through a website or someone they knew, they often end up with incompetent bankruptcy lawyers which are no good. Always do thorough research for the suitable lawyers in your area using different sources, shortlist some of them and then choose one after doing a small interview first. Doing this helps a person choose the best option is a reasonable price.
Hiring Without Asking About All the Costs
Anyone who is looking for a bankruptcy lawyer cannot be in a stable state which is why people often end up choosing a bankruptcy lawyer without asking enough questions about the costs. There are many hidden charges to the legal advice and the legal representation in the court which people don’t realize until they have to pay those. It is best to ask the bankruptcy lawyers all they will charge before and after the case earlier to finalizing a lawyer. This way you won’t have to spend any extra money after bankruptcy.
Hiring Without Doing A Background Check
There are several instances of people ending up in scams and frauds from their bankruptcy lawyers. Such things happen when people hire lawyers without gathering enough information about them and without confirming their legal affiliations. Scam lawyers are not professionally trained and they prey on the worried clients who are too stressed about losing their assets that they don’t focus on the lawyers. To get out of any financial or legal trouble from the lawyers, it is important to check the background of that lawyer, the years of experience, expertise, licensing, and the state bar affiliation.
Hiring Without Asking For the Availability
The specialized lawyers are generally not as busy as the general practice lawyers because they focus their attention on one type of case, but still, it is important to ask for the availability of bankruptcy lawyers before hiring them. Many people have trouble communicating with their lawyers because they are not available all the time. Hiring a lawyer without asking them about their availability during the whole period of the bankruptcy case is a mistake that should be avoided at any cost.
When to Look for A Bankruptcy Lawyer?
You should look for a bankruptcy lawyer when you think that your expenses are exceeding your credit limit. If you are spending more than you should according to your budget then you should most definitely look for a bankruptcy lawyer because such habits lead to bankruptcy easily. If you own a large corporation that is unable to pay its debts to the creditor, the first step is not to file for bankruptcy but to look for successful bankruptcy lawyers. If you are in a poor financial situation where your financial planners are not able to offer any suitable advice, it is time for you to look for bankruptcy lawyers.
That’s because there are many services bankruptcy lawyers offer other than just filing for bankruptcy. If you have been notified by your bank to liquify your assets to pay off your debts, you should first hire a bankruptcy lawyer. One thing that must be kept in mind when looking for a bankruptcy lawyer is the type of bankruptcy you are eligible for. There are different kinds of bankruptcy lawyers that handle each type of bankruptcy, for example, a chapter 7 lawyer will handle cases filed for chapter 7 only. Similarly, you should not hire general practice lawyers for your bankruptcy case.
Classification of The Bankruptcy Law Codes
The bankruptcy law of the US has been classified into different categories which are called chapters, to ease people, in paying off their debts. Whether an organization decides to hire bankruptcy lawyers and announce that they have nothing to pay off its liability or the government issues a bankruptcy notice to the organization, there are always different options available. Each chapter of the bankruptcy law code serves a distinct purpose and facilitates a different set of bankruptcy cases. Here are all the chapters in the US bankruptcy law code:
Foreign Bankruptcy Cases – Chapter 15
The US economy grants loans to not only the organizations working in the country but also to foreign investors and businesses, which is why Chapter 15 of the bankruptcy law is made. Chapter 15 deals with the bankruptcy cases filed by debtors that belong to other countries. The bankruptcy lawyers are hired for the cross-border bankruptcy cases and they guide the foreigners to the discharge and exemption options for their respective cases. Individuals from all across the world who have financial resources located in the US can file for bankruptcy aids using Chapter 15.
Repayment of Debts – Chapter 13
Chapter 13 is a viable option for those who cannot pay off their loans at once, as this chapter allows a bankrupt person to pay off all of his/her loans gradually. After a person files for chapter 13 bankruptcy, the court sets a standard for how much money will be deducted from the salary of that person each month. Bankruptcy lawyers are hired by the courts to collect that fixed sum of money from the monthly salary or any other source of income. Most people who file for chapter 13 bankruptcy are guided by their bankruptcy lawyers to get an exemption after paying half of their debts.
Farmers And Fishermen – Chapter 12
The Constitution of the US has bankruptcy options for large business organizations to small family farmers. Chapter 12 is specially designed for the fishermen and the farmers who cannot afford to lose even a small amount of money in bankruptcy. The number of exemptions and the discharge benefits in chapter 12 is not available for anyone other than the low-earning members of the society like fishermen and farmers. Farmers and fishermen can hire bankruptcy lawyers and file for chapter 12 bankruptcy without having to lose their land and resources.
Reorganization – Chapter 11
This type of bankruptcy is best suited for large business corporations and organizations that have decided to declare themselves incapable of paying off debts. In chapter 11 the business that has gone bankrupt still stays in the market but remains under the strict supervision of the bankruptcy courts. Business organizations hire bankruptcy lawyers to come up with reorganization plans to pay the debts which are then monitored by the court. The reorganization plans give the corporation a chance to pay off debts without losing the business if the court approves them.
Municipalities – Chapter 9
Chapter 9 of the bankruptcy law code is for the cities, towns, educational institutions, and parks to pay off the credits to the government and banks. This type of bankruptcy can only be availed by the municipalities that are recognized by the government as a debitor. The bankruptcy lawyers help municipalities by providing the reorganization plans using chapter 9.
Liquidation – Chapter 7
Chapter 7 is the category of bankruptcy that comes to mind as soon as someone mentions the term bankruptcy. In chapter 7, the court orders the person and the organization filing for bankruptcy to give away their assets or land to pay back what they owe to the creditors. Chapter 7 is the most widely known category of bankruptcy in the US, also known as liquidation, which is the process of selling your assets to pay off your debts. The liquidation process varies from state to state, in some states the court will order everything one owns to be sold whereas, in other states one may be able to keep some items like furniture. The bankruptcy lawyers help you estimate the value of your assets and guide you on whether or not those assets be able to pay off creditors. For a person who owns no valuable asset for the liquidation, the court will prevent such a person from buying anything expensive in the future, such a situation is known as a no-asset case.
Public Misconceptions About Bankruptcy
There is no doubt that people should make their decisions wisely to avoid bankruptcy which takes a great toll on a person’s financial stability. But there are so many rumors and misinformation about bankruptcy that it becomes hard to understand when a person should and should not be worried. We have corrected some common myths and misconceptions people have about bankruptcy that make it sound scarier than it is:
You Can File For Bankruptcy Only Once In Your Life
This statement is incorrect, because both in Chapter 13, and Chapter 7 you can get cleared more than once. In Chapter 13, a discharge can be granted every two years, whereas, in Chapter 7, a bankrupted person can get cleared once after every 8 years. Despite the change in the bankruptcy laws in 2005, that made the laws stricter, you can still file for bankruptcy more than once. The information about the waiting period between two bankruptcies can be attained from bankruptcy lawyers.
You Can Never Get Credit Following A Bankruptcy
That is not true, because the bankruptcy stamp stays on your credit report for a maximum of ten years after which you can get credit again. There is no rule about the bankrupted individuals not being able to get their hands on credit again. In fact, as soon as a person recovers from the bankruptcy period, he/she is eligible for credit, they can even buy houses and vehicles soon after getting discharged.
In Married Couples, Both Spouses Have To File For Bankruptcy
A married couple may have sworn to be together through thick and thin but in paying off their debts they are alone. There is no law about spouses having to file for bankruptcy together in the US. If one spouse has a debt for which he/she has to file for bankruptcy, the other spouse can continue buying things on credit without having any obligations to the bankruptcy. If the debt was mutual between the married couple, in that case, both of them have to search for good bankruptcy lawyers and file together.
Those Who File For Bankruptcy Are Financially Ignorant
This is completely wrong to assume that all that file for bankruptcy are economically irresponsible or spending recklessly. People who have this misconception will be surprised to know that the top conditions which lead people to bankruptcy include loss of job, marital separation, and life-threatening medical illnesses. Not being able to handle the finances wisely can be one of the many factors that cause bankruptcy but assuming that as the core reason is a giant misconception.
Filing For Bankruptcy Can Make You Homeless
Bankruptcy does not mean that you will be thrown out of your house or any other property you have, there are exemptions available in each form of bankruptcy. The bankruptcy lawyers can help you understand that you get to keep most, if not all of your household items like furniture. There are less than 5% cases of bankruptcy where someone has to empty his/her house due to bankruptcy as there are so many exemptions granted by the government.
Habits That Save You from Bankruptcy
Filing for bankruptcy is nobody’s first choice when it comes to debt payment, because of the limitation on the credit as well as the fear of liquidation. On average there are less than 30% of people file for bankruptcy in the US annually. We cannot fully control the situations which can take a person to bankruptcy such as illness, divorce, or job loss but we can choose habits that can lower the chances of bankruptcy. Such as:
Putting Money Aside For Crisis
You can never know when a calamity may knock on your door, but being prepared for it at least saves you from the immediate shock and fear that comes with it. Putting money aside for medical or financial emergencies is a habit that can pull people out of so many financial loops. One can start sparing some money each month or each week for emergencies and that habit alone can provide a huge hand when faced with uncertainty.
Creating And Sticking To A Budget
Knowing how much and where your money is being spent every month can provide an outlook on your financial position. People who have created detailed budgets about all of their expenses are much better at handling finances and they hardly find themselves in a position to search for bankruptcy lawyers. Making a budget is not enough, you must have to stick to it as well to keep everything under check. Sticking to a budget every month seldom takes anybody on the road to bankruptcy.
Not Using The Credit Card For Day-To-Day Expenditures
The purpose of credit cards is to make occasional and bigger purchases such as using them for buying the furniture of your house. But when people start using their credit cards for every little thing they have to buy such as grocery shopping, and clothing, it raises red signals. A great way to prevent bankruptcy is to not use your credit card for daily expenses because it adds up in your credit bill and before you know it, there is a huge payable debt.
Having A Financial Planner
If you own a large business or have loads of money, hiring a planner is an excellent habit that keeps you from landing in bankruptcy. Financial planners provide a better understanding of your finances as well as guide you on how to invest and spend them. They also assist you with the laws regarding taxation, debts, and credits to avoid bankruptcy.
No human being can predict or stop natural accidents from happening such as being in a car crash or your house on fire, but what an individual can control is how to deal with such situations. The best way to deal with natural accidents is by getting insured because insurance makes a person prepared for uncertain circumstances. Those who have regular insurance for their homes, vehicles, and health are less likely to end up bankrupt because insurance provides a shield in uncertain times. For instance, if you got into a car accident, the insurance policy will cover all of your health and car wreck expenses, which prevents you from getting debt and bankrupt.