5 Risks of Filing Bankruptcy Without a Bankruptcy Attorney
1. Filing for the Wrong Bankruptcy
If you've ever heard the old adage “He who represents himself has a fool for a client,” then you know there's some truth to it. In fact, one of the first and significant risks to representing yourself is potentially filing for the wrong kind of bankruptcy. There are many different kinds of bankruptcy, but the two most common are Chapter 7 and Chapter 13.
If you're unable to keep up with the minimum payments on your debts, filing for bankruptcy can be an immense help. However, there are many aspects to a bankruptcy case, and the first consideration is which type to file for. Here are the fundamental differences between Chapter 7 and Chapter 13 bankruptcy filings.
Chapter 7 Bankruptcy
When filing for a Chapter 7 bankruptcy, expect to receive a discharge about 3 to 4 months after the original petition is filed. Once that case is legally filed, creditors can no longer call, contact, or hassle you. While most Americans do get to keep all their belongings, bankruptcy law states that filers must sell specific pieces of available property to any unsecured creditors. It allows for eliminating most, if not all, of your debt without having to lose all of your assets and property.
So why do people get to keep their belongings? Well, it's simple: bankruptcy exemptions actually limit what types of property can legally be used as payment to creditors. While Chapter 7 bankruptcy filers don't have a limit on the amount of debt they can have to legally file, there is a limit on the amount of money they're allowed to make.
Debts That Can't be Discharged in Chapter 7 Filings
While a Chapter 7 bankruptcy filing can often erase large amounts of debt, there are some things it can't do. For instance, if you're behind on the mortgage, Chapter 7 can't save your house. It also can't discharge certain debts, including:
- Income tax debts
- Debts to government entities
- Criminal fines or restitution
- Debts obtained through fraud
- Student loans
- Child support
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a little bit different than Chapter 7. It's bound by a repayment plan that restructures or reduces your debt. However, so are the creditors. Once the bankruptcy goes through, they can't dispute the amount they're going to receive. The payment plan amount you're required to pay for Chapter 13 is entirely dependent on how much money you make. Any debt that's not repaid can be eliminated by Chapter 13, but only after the payment plan has been completed.
To qualify for a Chapter 13 bankruptcy, there are a few caveats to consider. For one, you must have a regular source of income so you can handle a repayment plan. Also, any unsecured debts can't exceed the amount of $383,175. Secured debts cannot exceed $1,149,525. Chapter 13 filings also have debts that it can't legally eliminate, which are essentially the same as the Chapter 7 debts: child support, alimony, criminal fines, etc.
2. Going in Unprepared
If you're going to represent yourself instead of hiring a bankruptcy attorney, be prepared to do some significant research. In fact, representing yourself means taking on the entire complex bankruptcy process with zero experience unless you're already a lawyer specializing in bankruptcy proceedings. However, it's probably fair to assume that most people filing do not, in fact, have any experience.
Did you also know that the bankruptcy laws changed dramatically in 2005? The laws that are now in place have exponentially increased the complexity and effort it takes to handle a bankruptcy proceeding. Now, there are many different documents that must be produced during the case. Remember: it isn't like getting a desk from IKEA and reading the instruction manual. There is no instruction manual, which is why it's necessary to hire a lawyer.
Find an Experienced Lawyer that Specializes in Bankruptcy Cases
Here at Stockton & Stern in Overland Park KS, we specialize in bankruptcy filings. We know how debt can feel overwhelming, and we genuinely care about helping our clients. When you set up an initial consultation, we guide you through the entire process and help you make an informed decision about what's best for you and how to proceed.
Bankruptcy can help eliminate such issues as wage garnishments, non-stop creditor phone calls, foreclosures, repossessions, and collection suits. You never have to worry that we're going to mislead you—we want to help you overcome financial debt for good. Our attorneys will offer you an objective and honest opinion about your circumstances and what the best option is for you.
3. Difficulty Handling Unexpected Issues
Bankruptcy proceedings are extremely difficult and complex. While you may think that you have a handle on the situation, many different legal issues could arise during the process. When this happens, it's vital to have an experienced lawyer on your side to fight for your rights and help you get the outcome you ultimately want.
That doesn't mean one that will react to any issues the best they can. You need a lawyer with the intelligence, skills, and expertise to predict and issues and squash them before they turn into a problem. It's essential to anticipate those problems before they occur so that way you can be prepared for any eventuality. Remember, no two bankruptcy cases are the same. That's why it's crucial to hire an attorney with the experience and chops to handle your case, no matter how complex.
4. Not Getting the Outcome You Want
Probably the best benefit of hiring a bankruptcy attorney is having a better chance of getting the outcome you want for your case. Since every case is different, it's important to have a skilled attorney that knows the ins and outs of bankruptcy law. They can help you apply the means test, which indicates whether you even qualify for Chapter 7 or if you can afford to make payments on a Chapter 13 case.
5. Applying for the Wrong Exemptions
Did you know that the exemption system varies significantly for every state? If you're applying for bankruptcy in Overland Park KS, there's an entirely different system regarding exemptions than for those who live in Missouri, for instance. What is an exemption, exactly? Exemptions are property that remains safe during the case and can't be sold or taken. Well, non-exempt property is that which can be sold to pay off creditors in Chapter 7 cases.
In Chapter 13 cases, all of your non-exempt property is actually what sets the smallest amount that you'll have to pay to unsecured creditors. Did you also know that Kansas's homestead exemption contains residency requirements that can also be affected by your length of residency? That means you need to be aware of all the limitations and circumstances before filing.
When you need experienced and knowledgeable legal help for your bankruptcy case, call the experts at Stockton & Stern. While it's your right to represent yourself, doing so is not recommended. In fact, without hiring a lawyer specializing in bankruptcy, you run the risk of having the case thrown out and having to start anew. Contact us here at Stockton & Stern, LLC, today to learn more about our bankruptcy services or to set up a free initial consultation.