Bankruptcy is a legal process by which people and businesses in financial distress can arrange to pay a portion of the debts, or eliminate all of them, under the protection of the federal bankruptcy court. There are different types of bankruptcy, and navigating the bankruptcy system is often confusing and stressful. A bankruptcy attorney can take the guesswork out of filing a myriad of bankruptcy documents, help make sense of the process, and see to it that the process is completed in a timely manner. To explore this concept, consider the following bankruptcy attorney definition.
Definition of Bankruptcy Attorney
- An attorney who specializes in the process of bankruptcy.
What is a Bankruptcy Attorney
Bankruptcy is a complex legal process that is filed and litigated in the United States Bankruptcy Court. A bankruptcy attorney is a lawyer that specializes in the bankruptcy process, having knowledge about the various types of bankruptcy, filing the required documents with the court, and issues with creditors. Most bankruptcy lawyers handle either consumer (personal) bankruptcy, or commercial (business) bankruptcy. While the largest part of the bankruptcy process involves paperwork, notifying the appropriate people, and other administrative tasks, it may also involve litigation, when creditors challenge the bankruptcy.
Is Specialized Training Required to be a Bankruptcy Attorney
In all jurisdictions, an individual is required to possess a Juris Doctor (J.D.) degree, and to be licensed in order to practice law. Once an attorney has passed the test to be licensed in the state in which he intends to practice, he can practice any type of law he desires. Most attorneys spend time working with other attorneys experienced in their preferred field before going out on their own, but it is not required. In addition, while bankruptcy is a specialized field with its own set of rules and practices, there is no special training or certification required to be a bankruptcy attorney.
Is a Bankruptcy Attorney Required to File Bankruptcy
The law does not require that an attorney be hired for any legal proceeding, including bankruptcy. Those wishing to file bankruptcy without the assistance of an attorney can find helpful information on the federal court’s website, which also provides printable bankruptcy forms. The bankruptcy court clerk’s office can also provide forms, but they cannot give legal advice or help in filing.
Services Provided by a Bankruptcy Attorney
A bankruptcy attorney handles a debtor’s case from start to finish. His representation begins with a meeting to discuss the debtor’s needs, and which type of bankruptcy needs to be filed. The attorney will determine which forms are needed, fill them out, and ensure they are filed with the court. The attorney provides guidance and advice throughout the bankruptcy process, and deals with creditor issues.
A debtor should be able to count on his attorney to provide expert legal advice regarding all aspects of his bankruptcy case, including:
- The type of bankruptcy that is appropriate for his circumstances
- How bankruptcy can help him achieve his financial objectives
- Whether there are any risks or issues with his specific circumstance that may cause problems
In addition, a bankruptcy attorney should let his client know what can be done to make the process go more smoothly, and provide periodic updates to his client throughout the bankruptcy process.
Example of Bankruptcy Attorney Services
Adam is a bankruptcy attorney taking on a new client. He first meets with the client to review the types and amount of the client’s debts, as well as his assets and income. Adam advises his new client that he is eligible to file Chapter 7 bankruptcy and, once the client has paid his fee of $1,200, he prepares the appropriate documents and files them with the court.
Adam attends the Meeting of Creditors with his client, where the creditors have an opportunity to state their claim, and request repayment. Following this meeting there is a wait of several weeks while the Bankruptcy Trustee reviews the case, so Adam sends occasional updates to his client, and follows up on any requests from the Trustee for more information. If there is a hearing on the matter, Adam attends to represent his client at the hearing.
Meeting Deadlines for Filing Documents
In bankruptcy court there is a timeline that must be followed in filing documents, and attending meetings or hearings. In addition to the initial documents filed in the case, the court may request additional documents, which must be filed within a given time period. If the timeline is not met, the case may simply be dismissed, though there may be other more serious consequences. A bankruptcy attorney should ensure that all documents are filed in a timely manner.
Representation at Hearings and Meetings
During the bankruptcy process, there are certain meetings and hearings that must be attended. A bankruptcy attorney represents his client at all of these hearings and meetings, even if the client is not required to attend.
Bankruptcy Attorney Example Fee Structure
The cost to hire a bankruptcy lawyer varies, depending on the type of bankruptcy being filed, and the complexity of the debtor’s case. Of course, most people who find bankruptcy necessary do not have a lot of money to pay an attorney, which can be problematic. There is no fee schedule set by the court, which means that attorneys can charge, within reason, whatever they feel is fair for the amount of work they will need to do.
The fee for filing Chapter 7 bankruptcy, which is a complete discharge of personal debt, may range anywhere from $500 to $3,500 or more. Fees for Chapter 13, which is a reorganization of personal debt, are higher, as there is more work to be done. Chapter 13 bankruptcy attorney fees may range from $2,000 to $6,000 or more. Similarly, corporate bankruptcy is more expensive, also because there is a great deal of negotiating and additional time and documentation required.
Personal Chapter 7 bankruptcy attorneys often allow clients to make payments, but do not file any documents until the entire amount has been paid. They must do this because a discharge under Chapter 7 gets rid of all of the client’s debts, including outstanding bankruptcy attorney’s fees. Also, there is the issue that, once a client’s problems have been taken care of, his dedication to making payments toward that end often vanishes.
Why Make Payments
Even though no documents will be prepared or filed until the entire fee has been paid, there is an important benefit to hiring a bankruptcy attorney by making that first payment: the debtor can then tell creditors that he is filing bankruptcy, and that he has hired an attorney. Once he provides them with the attorney’s name and phone number, the creditors must stop hounding him. This is not a permanent fix, however. If the bankruptcy is not filed within a reasonable period of time, the creditors are free to begin their collections anew.
Example of Bankruptcy Attorney Fee Payments
Debbie and John need to file Chapter 7 bankruptcy, after racking up a lot of debt while John was unemployed. When the couple meets with a bankruptcy attorney, and are told his fee for handing their bankruptcy will be $1,500, they are concerned, as they barely have enough to pay their rent and buy food. The attorney explains that they can split the $1,500 fee into payments, and that as soon as they make their first payment, they can begin telling creditors they are represented by an attorney.
The couple can’t stand the stress of receiving hostile letters and phone calls anymore, so they scrape together the initial payment of $300, and hire the attorney. In this example of bankruptcy attorney fee installments, Debbie and John make additional payments over a period of three months, until the entire $1,500 has been paid. At this point, the attorney can gather all of the couple’s information, prepare their bankruptcy documents, and file them with the court.
Bankruptcy Document Preparer
There is an option, when filing bankruptcy, that does not involve an attorney. It is possible to hire a bankruptcy document preparer to complete the initial bankruptcy forms. Only a licensed attorney can represent a debtor in court, however, and a document preparer cannot give legal advice. Document preparers are not allowed to:
- Advise a client on which type of bankruptcy should be filed
- Tell a client how to complete bankruptcy forms
- Advise a client which debts can be discharged, or which exemptions can be claimed
- Represent a client in bankruptcy court
- Give advice on any legal matter, whether related to the bankruptcy or not
A bankruptcy document preparer can only type up the forms provided by the client, using information provided by the client. Paying someone to do this was a popular choice before all of the forms and information were provided on the bankruptcy court’s website. These forms are printable, and many can be filled out online prior to printing, making it just as easy for most people to complete their own forms.
Filing Without a Bankruptcy Attorney
It is not required that any debtor retain a bankruptcy attorney, though if the bankruptcy is complex, it would be a good idea to do so. A debtor who has very little income, and very few assets, may find that filing on his own will not only save him money, but will get the job done more quickly than waiting to fulfill a payment plan with an attorney before filing.
The federal court system provides “Bankruptcy Basics” on its website. Reviewing this information may answer a debtor’s questions about filing without a bankruptcy attorney. In a simple Chapter 7 bankruptcy, with low income and few assets, it is possible the debtor would only be required to attend one meeting, and no hearings, as the assigned bankruptcy trustee will do a review of the case and make a recommendation to the judge.
Following a serious accident, Omar missed several months of work, and gained nearly $90,000 in medical bills that are not covered by his insurance. He also fell behind in all of his payments, from his utility bills and mortgage, to his car payment. After reviewing the information on the court website, Omar decides he feels comfortable filling out and filing the list of required documents himself, so he downloads the documents and fills in the blanks.
Shortly after he files the documents with the court, Omar receives a date and time for a Meeting of Creditors, which he must attend. After this meeting he is told he must wait for word from the Bankruptcy Trustee. Several weeks later, Omar is happy to learn he doesn’t have to have a hearing before the judge, and that his debts will be discharged. Omar saved over $1,000 by not hiring the bankruptcy attorney he initially consulted.
Related Legal Terms and Issues
- Asset – Any valuable thing or property owned by a person or entity, regarded as being of value.
- Bankruptcy Trustee – A person appointed by the bankruptcy court to determine a debtor’s assets and debts, and report to the court.
- Creditor – A person or entity to whom money is owed by another person or entity.
- Debtor – A person who is in debt, or under a financial obligation to another.
- Juris Doctor Degree – A professional degree required to practice law in the United States.