News You Can Use
You Don’t Have to Have an Attorney to File Bankruptcy.
First things first. You do not have to have an attorney to file bankruptcy. Anyone can file bankruptcy, you just need to know the rules and use the right forms. For Western Michigan, you can obtain the official forms, read a bankruptcy primer, and review the Local Bankruptcy Rules by going to the court’s website. You can also find a lot of information on the internet about issues that frequently arise in bankruptcy. But filing by yourself can present a lot of pitfalls for the unwary.
Should You Use a Bankruptcy Petition Preparer?
The next step up from doing it yourself is to use a bankruptcy petition preparer. These are the folks who advertise “Bankruptcies Starting at $299” or the like. A bankruptcy petition preparer is not an attorney and can’t give you any legal advice. (Although it appears that some do violate state and federal laws by giving legal advice – and it is frequently bad advice!) A bankruptcy petition preparer will basically give you a lengthy questionnaire to fill out. Once you return the completed questionnaire, the bankruptcy petition preparer will transfer the information that you provided into the correct legal forms. They will print out those forms and give you the documents to file yourself. You may also receive an information sheet that tells you the next steps to follow after filing. But that’s it.
Junk in, Junk out.
The problem is, when you use a bankruptcy petition preparer, it’s “junk in, junk out.” That is, if you provide inaccurate or incomplete information to the bankruptcy petition preparer, you will get back inaccurate or incomplete bankruptcy forms to file with the court. “So what?” you ask. Well, if you omit information about your assets, the bankruptcy trustee can take those assets, sell them, and use the money to pay your creditors. That includes money in your bank account, vehicles, tax refunds (including current-year refunds for tax returns you haven’t even filed yet!) – and even your home. It isn’t the bankruptcy petition preparer’s job to tell you if something is missing or to answer your questions about what you have to include in your bankruptcy case.
How Do You Know If You Need an Attorney?
Bankruptcy can be a pretty complex process and every individual’s situation is different. So how do you figure out whether you need an attorney or not? One simple way is to schedule a free consultation with an experienced consumer bankruptcy attorney. You can use the “Contact Us” tab on this website to schedule a free consultation with me at your convenience. Or you can use an internet search engine to find practicing attorneys in your area.
But not all bankruptcy attorneys are created equal. Some attorneys (I tend to refer to them as “bottom dwellers”) just want to take advantage of a bad economy. They don’t dedicate a large portion of their practice to bankruptcy and generally don’t stay up on developing legal trends in bankruptcy law. In their minds, “a bird in the hand is worth two in the bush,” and they will generally attract clients in two ways: by under-pricing their services or by offering payment plans that violate the bankruptcy stay and discharge.
What is the Going Rate for Bankruptcy Attorneys?
One way to find out the going rate for bankruptcy attorneys in your area is to call a number of attorneys who are listed in the phone book (or online). The problem is, many attorneys don’t like to disclose their fees to “price shoppers.” And in all honesty, the amount of the fee may vary, depending on the complexity of your case and your ability to pay. In my experience, most attorneys in West Michigan charge between $1,200 and $1,800 for a chapter 7 bankruptcy case. The attorney fee for chapter 13 bankruptcies is higher, but should not concern most people because a large portion (if not all) of the attorney fee can be paid through your 3- or 5-year repayment plan.
You Get What You Pay For.
At the end of the day, I’ve concluded that when it comes to attorney fees, you get what you pay for. In most cases, you don’t have to give up your property, so you don’t need to waste time transferring it to relatives or (worse yet) concealing it on your bankruptcy schedules. Financial dealings with family members in the year leading up to your bankruptcy should be carefully reviewed. And you can usually recover money or property that was seized or garnished in the 90 days before your bankruptcy filing. An experienced bankruptcy attorney will thoroughly review your financial circumstances, listen to your objectives, and tell you how to avoid potential pitfalls and keep the maximum amount of property in your bankruptcy. After all, the goal of filing bankruptcy is to get a “fresh start” – not to make things go from bad to worse.
Why Can’t I Set Up A Payment Plan?
Most ethical attorneys won’t set up a payment plan for their fee. And when I say “payment plan,” I mean the attorney agrees to file your bankruptcy case after receiving a down payment, and lets you finish paying the rest of the attorney fee in monthly installments after your case is filed. Why is this a problem? Because if the fee is not paid in full before your case is filed, your attorney becomes one of your creditors. He or she must be listed in your bankruptcy schedules, and the debt is discharged in the bankruptcy, along with all your other debts. That means that you are no longer legally obligated to pay the balance of the attorney fee, and your attorney can never send you a statement or use any other method to collect the unpaid balance from you. Can you really trust such an attorney? The very person you’ve hired to protect you from your creditors becomes one of your creditors and is willing to violate the bankruptcy stay to collect their fee. Generally, people shake their heads and say, “no way,” when I ask them that question.
Nothing prevents you from paying the attorney fee in installments over time (if your attorney is willing to accept that), as long as the entire attorney fee is paid in full before the bankruptcy is filed. I’ve done that before, and in one case it took the client nearly 2 years before enough money was saved up. But I don’t see many benefits in sending your money off to an attorney to save for you, as opposed to saving up your money beforehand and then taking it to the attorney who will be preparing and filing your case. You might change your mind or your circumstances might change, and you don’t want to have to chase your money down later.
Bottom line: Get all the free information you can about bankruptcy, then decide whether you need to hire an attorney or whether you’re prepared to go it alone.