Corporations and partnerships are required by law to be represented by an attorney when they file for bankruptcy. So, if a person is filing for bankruptcy on behalf of a corporation or a business partnership, they want to be represented by a lawyer.
Bankruptcy is a process that both a business and an individual can go through in federal Bankruptcy Court. It is designed to help either a business eliminate or repay its debt under the guidance and protection of the Bankruptcy Court. Business bankruptcies are usually described as either liquidations or reorganizations, depending on the type of bankruptcy the business chooses.
A business has a choice among three types of bankruptcy depending on its structure. A business that operates as a sole proprietorship is viewed as the legal extension of its owner. The owner is liable for all of the debts of the business and owns all of its assets. Often, if the sole proprietor of a business wants to stay in business, they would choose to file for a Chapter 13 bankruptcy, which is a reorganization bankruptcy.
Corporations and partnerships are legal business entities that are separate from their owners, who are shareholders or partners. They have the choice of filing for bankruptcy under either Chapter 7 or Chapter 11 of the federal bankruptcy law. Chapter 11 bankruptcy is a reorganization bankruptcy for businesses.
While a business must be represented by a lawyer, individuals may represent themselves in Bankruptcy Court. While many people choose to do this in order to save money, the Bankruptcy Court strongly recommends that a person hire a bankruptcy lawyer to represent them when they file for bankruptcy.
Bankruptcy law and the rules of procedure in Bankruptcy Court are very technical. A simple mistake may affect a person’s rights in a negative way. For example, if a person forgets to file a required document, their entire case may be dismissed.
Also, bankruptcy cases are audited on a random basis to check the completeness of the information provided by the debtor; if the information is found to be inaccurate, a person may be prosecuted for bankruptcy fraud.
Finally, bankruptcy contains a number of hidden dangers. It is not uncommon for a layperson to lose a case because they did not know about a local court rule or that they were supposed to schedule a hearing but failed to do so.
In addition, filing for bankruptcy may also involve negotiating with creditors. For example, some banks allow holders of their credit cards to continue to have the credit card even after they have emerged from bankruptcy. Of course, the debtor may have to agree to pay off their credit card debt. A person who files for bankruptcy may not know how best to negotiate with creditors and can miss opportunities that could be favorable for their financial status.
How Much Does a Bankruptcy Attorney Cost?
There are different types of bankruptcy, but the top two that affect most individuals are Chapter 7 and Chapter 13. Chapter 13 bankruptcy helps people work out a payment plan that allows them to keep their possessions without negatively affecting their credit score.
Under Chapter 13, the person’s bankruptcy attorney helps the debtor set up a 3 to 5-year repayment plan. Hopefully, by the end of this period of time, their debts have been satisfied, and the individual can move forward free of debt.
In a Chapter 7 bankruptcy, a person’s assets are sold, and creditors receive payment of their debts from the proceeds. To file Chapter 7 bankruptcy, a person must meet certain eligibility requirements. However, if a person does not meet the requirements for a Chapter 7, a bankruptcy court would allow them to convert their case to a Chapter 13 bankruptcy.
Reportedly, a person should expect to pay about $2,000 for attorney’s fees for a personal bankruptcy, e.g., a Chapter 7 bankruptcy case, from start to finish. Of course, the amount of their Chapter 7 bankruptcy fees will depend on a number of factors. One is the complexity of the case. Another is the local market and what attorneys locally charge for their services, i.e., market conditions.
Attorney’s fees in a business bankruptcy may vary more because they are going to depend on the size of the business and other such factors. Generally, if a corporation or partnership files a Chapter 11 bankruptcy, their bankruptcy attorney charges them on an hourly basis. A Chapter 7 or Chapter 13 bankruptcy may involve less work, and an attorney may charge a flat, fixed fee for these kinds of bankruptcy filings.
The number of bankruptcy lawyers who are available in a person’s local market at any given time, that is, the supply, has an effect on fees. Also, an attorney’s level of experience and reputation also has an impact. A person should be ready to interview a number of lawyers and ask them openly to tell them exactly what they charge for their services.
Once a person finds a Chapter 7 bankruptcy lawyer in their price range, they want to ensure the lawyer can provide the services they need. Preferably, a person wants a lawyer in whom they have confidence.
Bankruptcy attorneys tend to charge their clients in one of two different ways. They might charge an hourly fee for their services, or they might charge a flat fee for their service. If the lawyer charges an hourly fee, they keep track of the time they spend on a case and bill the client monthly for their fee for that month.
If a lawyer charges a flat fee, they would request the entire fee at the beginning of the process. Or they might ask for a percentage up front and the rest, and then the case reaches a conclusion. Again, a person should clearly understand what the fee is for their lawyer’s services and how it is billed. In fact, it would be best if the person has this expressed clearly in writing.
What Are the Risks of Filing Bankruptcy Without a Lawyer?
As noted above, a person who is not a lawyer does not know either bankruptcy law or the rules of procedure in federal Bankruptcy Court. A person may make costly mistakes. A person might miss opportunities that could help them improve their financial outlook.
A person who is not a lawyer may not know about the potential offered by negotiating with creditors and how it might make their post-bankruptcy situation better than it might otherwise be.
Bankruptcy can have a lasting effect on a person’s financial outlook. The consequences can be very inconvenient. An excellent bankruptcy lawyer is worth the expense.
Can I Use My Bankruptcy Attorney for Other Legal Problems?
It is not wise to use a bankruptcy attorney to deal with other legal problems unless they have training and experience in other areas of the law that make them qualified to handle issues in a different area. So, for example, a person would not want their bankruptcy lawyer to represent them in a divorce.
If the issue with which a person needs help is related to their financial status and bankruptcy, then their bankruptcy attorney may well be qualified to handle the issue. So, for example, assume that the person needs to escape a home mortgage loan that they can no longer manage. In that case, their bankruptcy attorney may be able to negotiate a solution with the person’s mortgage lender.
Or their lawyer might be able to otherwise coordinate the mortgage issue with the bankruptcy. Bankruptcy lawyers can often handle home foreclosures.
Where Can I Find a Bankruptcy Attorney?
Of course, LegalMatch.com can connect a person to a bankruptcy lawyer in their area. In addition, in most towns and cities, there are attorney referral services that can connect a person to a qualified bankruptcy lawyer near where they live. For example, in Illinois, the Illinois State Bar Association has a lawyer referral service that would provide a person with a reliable referral.
A person generally wants to be sure that they look at the website of their state’s Bar Association or their city or county bar association. The Internet is rife with advertisements for bar association referrals that are not really official state or local bar associations.
Do I Need the Help of a Lawyer With My Bankruptcy?
If you are thinking about filing for bankruptcy or need other help in dealing with financial problems, you want to consult a bankruptcy lawyer.
LegalMatch.com can connect you to an experienced bankruptcy lawyer in your area. Your lawyer can review your situation with you and advise you whether bankruptcy is the right move or if there are other options. If bankruptcy is the right move, your lawyer can represent you and make sure you get the best possible result in Bankruptcy Court.
