Do I Need a Lawyer?

There is no requirement to use a lawyer to file for bankruptcy. However, some people decide to hire one to help them get through the process.

Whether you're a good candidate for doing it yourself, depends on the complexity of your financial situation, and your willingness to take the time to learn the rules of bankruptcy. (If you're not the type of person that is willing to follow instructions carefully, then self-help is probably not for you.)

Your Financial Situation

If your debts consist only of unsecured credit card debt, you may well be able to file for bankruptcy on your own.

However, other factors to consider are the amount and type of property you own. If you own your home, have substantial retirement savings, or other substantial assets you may want to consult with a lawyer to make sure your property is not at risk.

A good way to approach the decision of whether to hire a lawyer is to buy (and read) Nolo's book "How to File for Chapter 7 Bankruptcy." It will give you a good idea of what issues may arise when you file, and flags specific situations when a lawyer's help is called for. It will also give you a good idea of whether the filing process seems to complicated for you.

If your financial situation is simple, but you just don't want to deal with the forms, you might consider a using a Bankruptcy Petition Preparer to handle the form preparation.

Some lawyers may be willing to review your situation without taking on your entire case. If they see that your situation is very simple, some lawyers might even tell you that you can do it yourself.

One option is to get limited help from a lawyer combined with the services of a bankruptcy petition preparer. If you live in California, see www.bankruptcylawproject.com for more information about their "Affordable Attorney Advice" service, which, for a flat rate of $100, will answer all questions that may arise in the course of your bankruptcy, but not actually file bankruptcy for you.

Other Resources

The National Association of Consumer Bankruptcy Attorneys (NACBA) makes the case of why you should use an attorney and offers tips for those who cannot afford one.

What should I expect from a lawyer?

If you hire a lawyer, make sure your lawyer is an experienced bankruptcy lawyer. Bankruptcy is a complex, unique area of law that is not something that a general practitioner can learn overnight. Ask your lawyer how many bankruptcies they have filed.

Your lawyer will probably have you fill in a questionnaire about your property, debts, expenses and income. A good lawyer will be able to determine quickly what kinds of debts will be dischargeable in bankruptcy. The lawyer should advise you to get credit counseling before you file, and will may even have a computer terminal in their office where you can do the counseling right there, online. Many lawyers have preferred credit counselors that they work with.

Lawyers are responsible for making sure that your information is accurate, so they will be asking you to bring in documentation about your finances, including pay stubs, tax returns, etc.

For more information about working with a bankruptcy attorney, check out Chapter 10 of How to file for Chapter 7 Bankruptcy.

What is a "BPP" (Bankruptcy Petition Preparer)?

Bankruptcy Petition Preparers are non-lawyers paid by consumers to prepare bankruptcy documents, for filing in court.

Anyone can be a BPP, provided they comply with the rules governing BPP practice contained in the bankruptcy code.

Customers who use a BPP are representing themselves in the bankruptcy court. This means they are responsible for making the choices required of them in their case. They must also provide the BPP with complete and accurate information to be entered in the documents.

Because BPPs are not lawyers, their customers must obtain necessary legal information and advice from an independent source such as a self-help law book or a lawyer.

Think of it this way, A BPP's customers are their own lawyers and the BPP is their legal secretary. The customers have to be sufficiently informed to tell the BPP what to do.

If you are interested in becoming a BPP, see the Bankruptcy Law Project website at www.bankruptcylawproject.com.

What is Credit Counseling?

Credit counseling is now required for all persons filing for bankruptcy. It costs about $50 and can be done in person, on the phone, or over the internet.

A credit counseling session generally lasts about 90 minutes. They'll review of your financial situation, give you information about your rights and options, and propose a repayment plan for resolving your debt problems, if possible.

Credit counseling organizations are now screened by the federal government and only approved organizations can be used in bankruptcy. (Click here for the list of approved credit counseling agencies.) This regulation is a good thing. The field rife with rip-off artists and the regulation has been welcomed by legitimate credit counselors.

The FTC also publishes a useful pamphlet on how to select a credit counselor.

What is "debt consolidation"

Debt consolidation is the practice of taking out one large loan to pay off a bunch of smaller debts that are charging higher interest.

Debt consolidation may or may not be a good idea, depending on your situation. Lower interest is a good thing, but turning unsecured debts (like credit card bills) into secured debts (like a home equity loan) can be a costly mistake if you eventually file bankruptcy anyway. Unsecured debts can often be eliminated in bankruptcy, while most secured debts cannot. If you can't pay your secured debt -- or if the payments are late -- you may lose your home.

Also, the fees for setting up such loans can be expensive.

Government Mortgage Help

http://makinghomeaffordable.gov/

This is the direct link to the FREE help on mortgages from the Obama administration. GO HERE FIRST before you trust any advertisement for mortgage help that you may find. There are sharks out there trying to charge you for what the government offers for free. (see stories here, and here) Don't take the bait. Start with this site, and educate yourself as a consumer.

Here's what the Obama administration has put out ...

 

Bankruptcy Law & Procedure

Nolo - Bankruptcy

Nolo is a well-respected publisher of books and software designed to help people handle their own legal affairs. Their website features many helpful articles on a wide variety of topics, including bankruptcy. You can also buy Nolo products there.

NACBA.org

National Association of Consumer Bankruptcy Attorneys website. Features a brief bank on current issues of bankruptcy law that are being litigated in courts and news on bankruptcy legislation

MoranLaw.net

This website is run by the Moran Law Group, a firm in Mountain View, CA. It offers free information on a wide range of topics. As of the date of this review (Feb. '06) the information is in need of updating, but it is impressive in the scope of topics it covers. Attorney Cathy Moran leads the California Bankruptcy Discussion Group on Lawyers.com, where she answers questions from ordinary folks.

ABI World

Offers a variety of good information, but not exclusively for consumer bankruptcy.

Lots of coverage of large scale, chapter 11 business bankruptcies. Not intended for non-lawyers, but still some good, plain English information such as their report on "25 Changes to Personal Bankruptcy Law" which summarizes the changes in the new bankruptcy law. Also features a resource page on the 2005 bankruptcy law changes.

 

 

Bankruptcy Statutes

Federal

The best place to view the Federal Bankruptcy Statutes is at the website of doney.net. The proprietor there has done an an outstanding job with javascript and allows you to view a redlined version of the code that shows what language changed in 2005.

Generally, The Legal Information Institute at Cornell University is the place to go for access to the U.S. Code. However, they took almost two years to update the title 11 bankruptcy sections, and do not offer the redlining features of the doney.net website.

State Bankruptcy Exemptions

Congratulations! You're already at the best place to find the most up-to-date state bankruptcy exemptions on the internet, as well links to other sites on the web that also track state bankruptcy exemptions.

 

Bankruptcy & Society

The Internet is full of interesting reading on the consumer debt & credit industry, and how banks profit from keeping financially distressed debtors in distress for as long as possible.

Below is a sampling of articles, books, and other interesting resources on this topic, for those who want to learn more about how bankruptcy fits into the larger network of economic actors, incentives, and regulations (or lack thereof) that shape today's world.

Websites

SSRN - Social Science Research Network

A never- ending source of interesting studies and articles about the consumer credit industry. Among the more interesting articles: Search the term bankruptcy to find a wealth of topical articles from law reviews and other academic journals. Some are quite interesting, like the one that speculates that the real reason for the 2005 law was to make bankruptcy harder so that people would remain in financial distress on average of 6 months longer before giving ultimately filing -- which would be extremely profitable for banks as this is the time of maximum penalties and late fees. The author estimates banks stood to gain billions in additional penalty revenue thanks to the changes in the bankruptcy law.

 

Newspaper Feature Articles

From time to time, major newspapers such as the New York Times and Boston Globe have done excellent stories about various aspects of the debt and credit industry.

Boston Globe

Debtors' Hell - Preying on Red Ink America
Boston Globe Spotlight Series

This Boston Globe Spotlight Team investigation into the world of consumer debt in the United States found a system where debt collectors have a lopsided advantage, debtors are often treated shabbily by collectors and the courts, and consumers can quickly find themselves in a life-upending financial crisis

 

Documentary Films

Several excellent films are now on DVD that explore

MaxedOut

Other Free Audio/Video

Bankrupt: Maxed Out in America

This is a one-hour radio documentary and website about bankruptcy in america from American RadioWorks and Marketplace from American Public Radio

See also: "The boom in going bust" -- a report by Marketplace reporter Chris Farrell on a day in bankruptcy court.

The Credit Card Industry

How it Reaps Billions in Profits From Distressed Debtors

Feeling bad about your bankruptcy?

Don't.

The banking industry has made a calculated science of reaping billions of profits from distressed debtors.

By casting a wide net to grant credit to everyone, the real sweet spot for banks is the distressed debtor that is caught a never-ending cycle of penalties, fees, and exorbitant interest rates -- rates that would have been a felony if charged a generation ago.

NY Times/PBS Frontline:
The Secret History of the Credit Card

The issues covered in this 2004 documentary are still current, and worth watching. It's an excellent recounting by PBS and The New York Times.

You'll learn about a U.S. Supreme Court ruling almost 20 years ago that opened the door to abusive lending practices and the rise of the modern credit card industry.

After watching this, you'll understand why your credit card company is probably based in South Dakota or Delaware, and why Tom Daschle and Joe Biden sided with Republicans and the banking industry in voting for the 2005 bankruptcy law changes.

.
PBS: Frontline Video and Articles
NY Times: Articles

Senate Banking Committee

2007 Hearing on Credit Card Fees

Congress is showing signs that it may act to regulate the hugely profitable practice bait-and-switch credit card offers and exorbitant late fees. New Democratic Senate had a hearing on the issue.
Webcast of hearing (archive)
(3 hours long. Testimony begins at 56 minute mark)
NPR report on the hearing
Testimony of Elizabeth Warren
Harvard Law professor clearly makes the case for regulation of consumer credit contracts. Consumers need to be protected from deceptive and dangerous credit deals in the for the same reason we have laws that prohibit the sale of unsafe toasters and cars: Safety laws mean you don't need to be an engineer to avoid buying a dangerous toaster. Likewise, consumers shouldn't need to be CPAs to avoid a signing a dangerous credit contract.

See also

NY Times Sunday Magazine
Debt: (Special Issue) (6/11/06)

All about America's debt problems from a variety of perspectives. Interesting reading. Good articles on bankruptcy, student loan debt and related issues.