A chapter 13 bankruptcy attorney is an integral part of filing personal bankruptcy. While there is no law requiring debtors to have legal representation, few can comply with the strict guidelines of new bankruptcy laws on their own.
When hiring a chapter 13 bankruptcy attorney it is best to consult with three or four lawyers to determine which one is best suited for your needs. Personal bankruptcy is an intimate process that can be embarrassing and uncomfortable. Working with a lawyer whose personality is compatible with yours can make the process more bearable.
Take time to organize financial records and make a list of questions prior to meeting with prospective bankruptcy attorneys,. When contacting law firms to arrange a meeting, ask what type of documents the attorney requires. Most lawyers request wage statements, current and previous years’ tax returns, detailed list of income and expenses, and creditor contact information.
Debtors must adhere to guidelines outlined in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. BAPCPA requires bankruptcy attorneys to thoroughly investigate their clients claim to ensure information provided is truthful. Lawyers are required to submit notarized statements verifying their clients’ chapter 13 petitions are necessary.
Bankruptcy lawyers can be held accountable if clients misrepresent their financial status. Therefore, attorneys must engage in additional research to verify the facts. Higher risk factors and additional casework have resulted in increased legal fees; making it challenging for many Americans to obtain affordable legal counsel.
Debtors whose income is below poverty level may qualify for pro bono legal services. The American Bar Association provides a nationwide list of Chapter 13 bankruptcy attorneys offering pro bono services at abanet.org.
The bankruptcy process encompasses multiple steps. Debtors must hire a chapter 13 bankruptcy attorney to file a petition through the court. Creditors are notified of the bankruptcy petition and later attend a 341 creditor meeting to discuss payment arrangements.
Debtors are required to obtain credit counseling through a U.S. Trustee agency. A chapter 13 payment plan is submitting to the judge for approval. Debtors must submit payments to the bankruptcy Trustee until outstanding debts are fully paid.
BAPCPA requires debtors to repay a portion of their debts using a Chapter 13 payment plan. The amount of debt to be repaid is determined by the means test which is a financial tool that compares debtors’ income to their states’ median income level. Individuals earning less than median income levels may qualify for Chapter 7 bankruptcy, which requires debtors to liquidate assets to pay off creditor debts and discharges remaining debts.
Chapter 13 payments usually extend for 2 to 3 years. During the creditor payment phase, debtors are prohibited from acquiring new debt without court authorization. If debtors do not adhere to their bankruptcy payment plan, creditors can petition the court and request dismissal of the case.
It is estimated more than half of debtors fail out of bankruptcy within the first year. When this occurs, debtors no longer receive court protection and creditors can commence with collection action, including foreclosure, repossession of assets, and wage garnishment.
While personal bankruptcy can provide debt relief, it can also cause additional financial hardship. It is recommended to research bankruptcy alternatives such as debt consolidation, debt settlement, or budgeting which can provide similar results without the impact to credit scores.
American Bar Association – Pro Bono and Public Service Center
Bankruptcy Abuse Prevention and Consumer Protection Act