When to Hire a Bankruptcy Lawyer: 9 Situations

If you’re dealing with mounting debt, creditor calls, and past-due invoices, you may want to consider filing for personal or business bankruptcy. Bankruptcy law is complicated. The right lawyer can help you navigate the legal process, meet deadlines, and preserve some of your personal and business assets.

Here’s an overview of nine situations where hiring an attorney is in your best interest.

Nine situations that may call for a bankruptcy lawyer

1. Your financial situation is too complicated

You may need to hire a bankruptcy attorney if you have a large personal estate and a complex business with several assets, liabilities, and multiple creditors. 

If you have a business with numerous vendors, contracts, and assets like equipment, real estate, and intellectual property, you will likely benefit from talking to a lawyer. Bankruptcy attorneys can help you identify assets and find a way to assist you in protecting key pieces of your business.

2. You need to protect your assets

Concerns about losing everything are common among people who contemplate filing for bankruptcy.

However, even if you file bankruptcy, this doesn’t mean you have to turn over all your assets. Some assets may qualify for exemptions, and despite the bankruptcy, you can still protect key pieces of real estate and other valuable parts of your personal and financial portfolio. A bankruptcy lawyer will guide you through each exemption and how to structure your bankruptcy so that these assets are not seized.

3. Creditors are threatening lawsuits

You receive yet another call from a creditor asking you about payment on a credit card bill. Your creditors expect payment and will try to collect on a debt, especially if your accounts are severely delinquent. 

Creditors may place liens on personal and business property as a way to motivate you to pay them. Your bankruptcy lawyer is instrumental in protecting you from additional legal consequences and paving the way for settling some of your debts.

4. You're facing foreclosure

Losing your home or business is a scary possibility, especially if creditors are trying to seize your property. A bankruptcy attorney can advise you whether filing for bankruptcy may pause foreclosure. Many states have a homestead law exemption for your home once you file bankruptcy.

In the case of property in a business under a foreclosure threat, filing for bankruptcy can pause the process and explore ways to restructure your debt, possibly saving the property.

5. Legal challenges or fraud involvement

Allegations of fraud or other legal challenges could seriously jeopardize your financial future. A bankruptcy attorney can help you handle these allegations within your proceedings and provide potential defenses.

6. You’ve filed bankruptcy before

Did you already file a bankruptcy proceeding 10 years ago? If this isn’t your first bankruptcy proceeding, an attorney can advise you on how quickly you can file again in bankruptcy court and what the ramifications are for your future financial picture. A bankruptcy attorney will help you understand the law and how quickly you can receive a discharge from your debts.

7. You have personal and business debts

Mixing personal and business debts can cause potential complications in bankruptcy cases. Bankruptcy lawyers will ask you questions regarding this debt and determine whether a Chapter 7, 11, or 13 bankruptcy makes sense for you.

8. You’re confused about which type of bankruptcy to file

Reading the bankruptcy code is overwhelming, and most people cannot understand what the statutes signify. It can be difficult to understand the nuances, laws, and aspects of deciding what type of bankruptcy to file without a lawyer's guidance.

Looking at your personal and business situation, an attorney can determine which bankruptcy filing works best for your financial situation.

9. You need detailed legal advice

When do you talk to the bankruptcy trustee? How does filing bankruptcy impact your credit score? These are some of the questions a lawyer can answer for you. Bankruptcy laws are complex and vary by state. An attorney provides personalized advice given the specifics of your financial situation, explains the necessary paperwork you need to file, and advises you about the local bankruptcy court logistics.

Everything a bankruptcy lawyer does

Navigating a bankruptcy involves complicated laws in federal courts and paperwork. A bankruptcy attorney will advise you whether you qualify for bankruptcy, determine what type of bankruptcy is best for your situation, and represent you throughout any court proceedings. 

If you don’t know where to find a bankruptcy attorney, LegalZoom has lawyers who can provide a consultation on the specifics of your case and the law impacting you.

Let's take a look at the role of a bankruptcy attorney in your case:

Initial financial assessment

Your consultation with a bankruptcy attorney involves discussing your financial situation. This may include answering questions and providing proof of income, liabilities, assets, and expenses. It is important to be transparent with your attorney regarding your financials because this will determine what type of bankruptcy you will file. 

If you own a business, the attorney will identify the best approach to debt relief.

Choosing a bankruptcy type

An attorney will help you decide which bankruptcy filing is right for you and provide the requisite legal services.

There are three options for a bankruptcy filing. An individual can file a Chapter 7 bankruptcy, which is a total discharge of all debts and is considered a total liquidation. 

Chapter 13 bankruptcy is available for individuals who want options within bankruptcy and strive to reorganize their debts. A Chapter 13 bankruptcy filing often allows individuals to keep their home and to reschedule their debts (often for a reduced amount) to creditors. 

A Chapter 11 bankruptcy generally involves businesses that want to continue to operate with management by a bankruptcy trustee. With a bankruptcy court’s approval, an individual who owns the business can borrow new money.

Preparing and filing documents

It probably comes as no surprise that there is a substantial amount of paperwork involved in filing bankruptcy. Your bankruptcy attorney will guide you in filing the bankruptcy petition and attaching any supporting documentation for the court's review.

Your attorney will ensure your filing occurs in the proper court and the appropriate fee is paid to the bankruptcy court.

Legal advice about compliance

Reading the bankruptcy code is cumbersome. You may not understand the legal ramifications of the bankruptcy process or how the bankruptcy code applies to your specific circumstances.

During these instances, a bankruptcy attorney will help you understand the laws and regulations, will assist in communications with creditors, and will make certain you are in touch with creditors when they communicate with you.

Negotiating with creditors

One of the key aspects of your bankruptcy case is negotiating the amount of burdensome debt you owe creditors. Bankruptcy attorneys negotiate payment plans, and in some instances, help reduce your debt with creditors. 

Your bankruptcy attorney will aim to reduce credit card balances or arrange manageable repayment plans.

Post-bankruptcy law guidance

Part of post-bankruptcy guidance involves rebuilding personal financial health or a business’s ability to continue to make a profit. This includes advice on managing remaining debts, improving credit scores, and avoiding future financial pitfalls.

FAQs

Can you file bankruptcy without a lawyer?

It is possible to file bankruptcy without attorneys involved. However, it may be difficult for you to navigate the bankruptcy process, code, and laws. Also, the required paperwork, meetings, and court hearings could have technical information you may not understand. 

Filing bankruptcy can feel daunting. An attorney can help you navigate bankruptcy laws and decide how to move forward with your filing.

How much does a bankruptcy attorney cost?

A bankruptcy lawyer's fee can vary depending on the type and complexity of bankruptcy filed. Generally speaking, a bankruptcy case can cost several hundred to thousands of dollars. You should ask detailed questions about fees at the initial consultation with your attorney.

How long does bankruptcy take?

A bankruptcy may span several months to years, depending on the complexity and motions filed during the case. Factors affecting duration include the complexity of the case, creditor actions, bankruptcy court backlogs, repayment plan length, and your compliance. 

Typically, a Chapter 7 case will take three to six months from filing to discharge. A Chapter 13 case will take three to five years from the repayment plan to discharge. A Chapter 11 bankruptcy case will take a few months to years, depending on the complexity and negotiations involved.