BANKRUPTCY REVIEWS

Chapter 7 Bankruptcy Attorneys

THE ROLE OF CHAPTER 7 BANKRUPTCY ATTORNEYS

One of the questions that consumers struggle with is that of whether or not to hire a bankruptcy attorney for their case. Were lawyer fees low, this would not be an issue, but the mere fact bankruptcy filers are broke to begin with, this issue is of prime importance.

In a nut shell...

You should not hire a lawyer for a consumer chapter 7 or chapter 13 bankruptcy.

As we have noted in the creditor meeting article, bankruptcy filing is an administrative process much like applying for vehicle registration or applying for social security benefits. It is not fundamentally a legal process. 

When you file bankruptcy, there is no plaintiff and there is no defendant and there is no law suit. You are not on trial. That is the real reason why you do not need a lawyer.

For a consumer bankruptcy, you will not have to come before a judge. It is simply about preparing and filing the mandatory forms and attending the trustee hearing.

If you are already broke, you would want to keep the little money you have rather than to gift it to a lawyer. With the help of a full-service bankruptcy preparer, you can prepare your own bankruptcy and achieve the same results as having a lawyer.

If you are considering chapter 13 bankruptcy, you need to read our detailed article on the attorney chapter 13 tricks.

In spite of being broke, many people hire bankruptcy lawyers and this is because they are either afraid or they do not understand the process. Also, bankruptcy layers contribute to this disinformation.

Price is not everything

Which of these would you rather have? 

To save $40 upfront in fees and lose $10,000 in undischarged debts, or

To pay $40 more upfront and discharge $10,000 more than you thought possible.

It is what they call, "penny wise and pound foolish." A lot of people unfortunately will choose to save the $40 upfront and damn the consequences, and for these people, it is this kind of thinking that got them in financial trouble in the first place.

On this wise, if you believe that you will get more debts discharged using an expensive attorney, the attorney's upfront cost will pale compared to the extra debts you will discharge. However in practice the opposite is true. Most bankruptcy lawyers do not go the extra mile to seek a deeper discharge of debts. They do not because it generally requires more work than they have been paid for. Talking about a deep discharge and bankruptcy attorneys, here is a must read...

Why Bankruptcy attorneys usually do not go for a deep discharge

There is a very important principle in bankruptcy law that every person filing chapter 7 should be aware of and that is, a bankruptcy lawyer cannot charge you anything more once your bankruptcy has been filed. 

Before you begin to jump up and down rejoicing, this is actually a bad thing. Why?

The reason is that with just about EVERY bankruptcy lawyer in a consumer case, the fee they charge covers only advising you, preparing the documents and holding your hands at the trustee meeting. That is it! That is all they have planned for. This means that once they come back from the trustee meeting, there is no more incentive for them to do anything more for you

For a lot of people, that is all that is needed for the bankruptcy and yes, it will get you your basic discharge. 

But for many people, the basic discharge will still leave you with $5,000, $10,000 or even $20,000 in undischarged debts that could be easily discharged if the lawyer just went a little bit further. But because they cannot get any more money from you after the bankruptcy has been filed, they will not.

The extra discharge of your debts, which we refer to as deep discharge or maximum discharge comes about by using reaffirmation agreements to cram down secured debts to your advantage; by challenging the validity of many types of secured debts and having the court void them; and by exploiting the structural weakness of the large nationwide equity finance lenders. Typically, if you have any sort of secured debts and you take the extra step to do pursue a deep discharge, you will almost certainly realize several thousands of dollars in more debts being discharged than not.

Because they cannot get paid anymore by you once your case has been filed, almost no bankruptcy lawyer will even tell you that there is such a thing as a deep discharge in a chapter 7 case. Try calling any bankruptcy lawyer and asking them if they have heard of the term, deep discharge and they will draw a blank stare. Most times, it is because they have never done one or because they would rather not bother.

If you already have a bankruptcy lawyer, when issues such as reaffirmation agreements come up after the filing, their advice to you will be this short sentence, "you can sign the agreement if you want or you can decide not to sign it if you do not want to." With this one innocuous statement alone, they are likely to have cost you as much as $5,000 or more in undischarged debts that could very easily be discharged.

On the other hand, if you use one of our top picks in the full-service bankruptcy category, you will find the step-by-step procedure for a deep discharge in their knowledgebase. In fact that is the main goal of a bankruptcy knowledgebase. And to think that you paid less than $300 for everything and got to reap a saving of $5,000 to $20,000 in a deep discharge, that is truly amazing! 

So as we said, it is not about price or about hiring a bankruptcy lawyer. It is about knowledge and who will help you acquire it. If a bankruptcy lawyer will get you a deep discharge, then they are worth their loft price but as we said, it almost never happens with them.

Here are some of the myths perpetuated by bankruptcy lawyers.

Myth #1:  You need to be represented by a bankruptcy.

Wrong! A lawyer cannot represent you in bankruptcy while you stay at home. A lawyer can only give you legal advice if your case is complicated.


Myth #2: Only a lawyer will stop the creditors from harassing you.

Wrong! A lawyer cannot stop the creditors from calling you or harassing you on the phone. Creditors and their collection companies are required by law to stop contacting or calling you the very moment you file your bankruptcy. All they need to stop is to be told that you have filed bankruptcy. Once you file bankruptcy, the very next time a collection company calls you, tell them that you have filed and they will never call you again. That is what the lawyer's secretary does. They just say that you filed bankruptcy, and you can do the same. 


Myth #3: A lawyer will notify the creditors on your behalf

Wrong again! When you file bankruptcy, the court clerk mails all the creditors an official notice to instruct them not to take any further action against you. It is not your job or the lawyer's job to notify the creditors. Lawyers often take credit for notifying the creditors simply as a way to convince you that you need them.


Myth #4: You need a lawyer at the creditor meeting

Not true! Not only do you not need a lawyer at the trustee meeting, there is no actual meeting of creditors and if you have a lawyer there, he or she cannot speak for you. Click here to read the full article on the trustee meeting.


Myth #5: You need a lawyer to talk to the judge

Wrong again! For consumer chapter 7 cases, you do not get to see a judge at any stage in the process. If you have a lawyer, he or she does not get to talk to the judge. When your case is nearing an end, the court clerk will send you a form letter saying that your debts have been discharged, and you are done.


Myth #6: I need a lawyer just in case the creditors object

Wrong again! In a consumer case, there is no such a thing as a creditor objection or challenge to your entire bankruptcy filing. Though it seldom occurs, a creditor may ask the court to allow them to continue with an eviction or repossession if they think that you are just stalling them, but they do not come against your right to file bankruptcy. 

This does not mean that lawyers have no role to play in bankruptcy cases. You need a bankruptcy lawyer if the entity filing bankruptcy is a corporation or business partnership. You also need a lawyer if you have an adversary proceeding, but that is usually not applicable to consumers. 

You may also need to talk to a lawyer if your case is complicated and you need legal advice. Many lawyers will give you a free initial consultation and can often answer common legal question there. If you do not need to hire a lawyer outright, then get a free consultation and then hire a full-service company to prepare the actual bankruptcy at low cost.

Read the article on the creditor meeting to learn more about the process, if you have not already done so.

If you are filing chapter 13 bankruptcy, read our special article on chapter 13 attorney tricks.


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