Hiring a Chapter 7 Bankruptcy Lawyer – What To Expect
When a person cannot fulfill his or her financial obligations, one is said to be bankrupt. To free oneself from the debts, one can file for bankruptcy. A person can file for bankruptcy. There are many chapters under which people can declare bankruptcy. Unfortunately, there tend to be several myths surrounding bankruptcy. With the right information and help, one can safely broach the topic.
What is Chapter 7 bankruptcy?
Of the chapters mentioned above, Chapter 7 happens to be used most often. Chapter 7, bankruptcy involves the liquidation of non-exempt assets to pay off debts. A bankruptcy trustee is appointed to oversee the process. Later, the proceeds are used to pay off the creditors. The debtor is not obliged to pay the debts that remain after the proceeds are used up.
The priority of debts
In Chapter 7, some rules assign priorities to debts. All debtors must pay off their debts in this order. The priority is to clear the unsecured debts. Child support, tax debts, and personal injury claims fall under unsecured debts. All the unsecured debts will be divided into classes based on priority. Unsecured debts with high priority must be paid off first. Next come the secured debts. Debts that have been acquired after submitting collateral are called secured debts. These debts have lesser risk as they are backed by collateral. Finally, unsecured debts that have lower priority are paid off.
The steps in the process
Filing for bankruptcy under chapter 7 consists of the following steps.
- Credit counseling: The first step is to fill forms to initiate the process. The bankruptcy forms contain details of assets, income, and expenses. Then, the debtor must undergo credit counseling.
- Meeting the creditors: After submitting the forms, the court will appoint a trustee to represent the debtor. The trustee then arranges meetings with the creditors to confirm the validity of finances.
- Debt repayment: The trustee finalizes the assets for liquidation. Assets necessary for everyday life are exempted.
- Bankruptcy discharge: Once the repayment process ends, the debtor has no obligation to repay the remaining debts. They are discharged.
Why should one go to a chapter 7 bankruptcy lawyer?
Hiring a bankruptcy chapter 7 lawyer is not mandatory. One can file for bankruptcy on their own, provided they are willing to invest enough time for research. Keep in mind that this can be a time-consuming and intimidating process. Therefore, although it is not mandatory, it is recommended to hire a lawyer to help with the process.
Here are a few advantages of hiring a bankruptcy lawyer.
- Analyze the options: People who want to file for bankruptcy are generally unaware of the other options. A chapter 7 lawyer in San Diego can help clients analyze the case and check other options.
- Select the bankruptcy chapter: – While filing by themselves, people may not know which chapter is the best. Hiring a lawyer would help determine the eligibility and the chapter.
- Better odds – Filing for bankruptcy involves a lot of paperwork and submitting reports. A person has better chances of getting accepted when one files for bankruptcy through a chapter 7 bankruptcy lawyer.
- Eliminate harassment risks: A person filing for bankruptcy is bound to get several calls from his/her creditors. Harassment from creditors is a real thing, and it can be avoided if a lawyer is hired.
- Professional representation: People who choose to deal with the process on their own have to face questions in court. Without a legal expert by their side, it can become difficult to handle the questions.
- Overall smooth process: Without an understanding of the legal jargon, each step of the process is nothing but a hurdle. A chapter 7 lawyer in San Diego can help clients have a better court experience.
Without professional help and guidance, there are so many things that could go wrong. Right from filling the forms to bankruptcy discharge, it is better to have an expert to help.
When should one go to a chapter 7 bankruptcy lawyer?
Although chapter 7 is one of the most popular chapters under which people declare bankruptcy, it has its eligibility criteria. Only those who fulfill the eligibility conditions can hope to get their form approved. While the lawyer will help determine whether the client fits the chapter 7 criteria, there is no harm in knowing a few basic things about the chapter.
The mean test
A test called the mean test has been designed to determine whether the applicant’s income is low enough for Chapter 7 bankruptcy. The court calculates the debtor’s disposable income by subtracting the monthly expenses from the monthly income. If the disposable income is high, the debtor’s chapter 7 bankruptcy application will mostly be rejected.
If the debtor’s income is less than the state’s median income, one can directly file for bankruptcy under chapter 7. If the income exceeds the state’s median income, the disposable income is calculated. If this number is higher than a fixed threshold, the applicant is deemed ineligible.
The debts covered under chapter 7
People who have debts due to the following reasons can use chapter 7.
- Personal loans
- Credit card debt
- Unpaid medical bills
- Mortgage loans
- Auto loans
And any form of unsecured debts.
The debts not covered under chapter 7
Not all debts come under chapter 7. People with the following debts cannot use chapter 7. to file for bankruptcy
- Personal injury debts against a debtor who was DUI
- Student loan
- Child support
- Back taxes
Signs to look for
For the best chances of approval, it is better to check for the following signs to know whether one is eligible for chapter 7 bankruptcy.
- The monthly income is lesser than the state’s median income.
- The disposable income amount is insignificant.
- The sum of the debts exceeds half of the annual income.
Anyone whose debts fall under the first category above can hire a chapter 7 lawyer in San Diego.
How to choose the right chapter 7, bankruptcy lawyer?
When a debtor searches online for ‘chapter 7 bankruptcy lawyer near me,’ tens of results may pop up. However, not all lawyers are worth the client’s time or money. What are the things that one should consider so that they hire the best lawyer?
- Certified expert: Each state has its association of bankruptcy lawyers. Clients can check on the association website whether their lawyer is a member. Memberships are awarded only to reliable certified experts.
- Alternate solutions: A knowledgeable bankruptcy lawyer must be willing to suggest and discuss any other viable options.
- Service that justifies the fees: With so many debts in hand, paying high chapter 7 lawyer fees for poor service is the last thing any debtor would want. Thus, make sure that the lawyer charges the right amount for the quality of service.
- Awareness: Code changes are brought in from time to time to minimize loopholes and misuse of the law. The chosen lawyer must have up-to-date knowledge of code changes.
- A good rapport: No matter how qualified or experienced the lawyer is, the process will be difficult if the lawyer-client relationship is not smooth.
The main reason for hiring a lawyer and shelling out money is to ease the anxiety of dealing with unfamiliar processes. Therefore, choose a chapter 7 lawyer in San Diego who is patient with the clients and can break it down for a layman’s understanding.
Myths About Filing for bankruptcy
There are a lot of myths surrounding the concept of filing for bankruptcy. The article aims to dispel some of the myths and differentiate the facts.
It permanently affects the credit score.
People refrain from declaring bankruptcy with the fear that their credit score is doomed forever. It cannot be further from the truth. Of course, it will take time for the credit score to pick up post-bankruptcy. But the effects are by no means permanent.
All debts can be discharged.
People hope that chapter 7 will discharge all of their debts and give them a fresh start to start thinking of alternatives. While it is true that chapter 7 can discharge most of the debts, student loans, child and spousal support cannot be discharged under any chapter.
All property will be lost.
Another myth that causes fear among debtors is that they will lose all of their property. However, that is not true. When a debtor files for bankruptcy under chapter 7, a few properties will be exempted. Property necessary to maintain a basic standard of living will be left untouched.
Now that all the misconceptions have been cleared, debtors who fulfill the criteria can hire a chapter 7 lawyer in San Diego without worrying much. Bankruptcy is not only caused due to grave financial mistakes. It can also happen due to things outside one’s control. Thus, there is no shame in declaring bankruptcy. While the upfront costs may seem like a lot, it will pay off in the long run. The only thing to take care of is that debtors cannot file for multiple bankruptcy cases within a short period.