Did you know that the bankruptcy of Lehman Brothers was one of the biggest bankruptcies in US history? With assets in bankruptcy of about $691 billion, it was the 4th largest investment bank in the US when it filed for bankruptcy.
Whether you have a billion dollars in assets or a few thousand, you can still run into bankruptcy issues because of your liabilities. Filing for bankruptcy can get complicated because of the paperwork, court processes, and negotiation with creditors. Hiring bankruptcy attorneys can help you get the best results.
If you’re not sure about filing for bankruptcy and want to learn more about the benefits of hiring an attorney for your case, then you’re in the right place. Read on to find out why bankruptcy cases are best left in the hands of an experienced attorney.
What Is Involved in a Bankruptcy?
Bankruptcies can arise due to many reasons, including increased expenses or mismanagement of finances. Around 17 major retailers filed for bankruptcy in 2020, from Papyrus to Pier 1. Some companies like Payless Shoes, Gymboree, and Charming Charlie filed for bankruptcy for a second time.
One of the fundamental goals of bankruptcy law is to give debtors a fresh financial start. It releases you from personal liability from your debts and ensures that creditors can’t come after you to collect those debts after filing for bankruptcy.
Different Types of Bankruptcies
Filing for bankruptcy isn’t a simple matter of filling out some paperwork. It requires an understanding of the different types of bankruptcy processes, including bankruptcy under chapters 7, 11, and 13. Each chapter has different rules, and you need to understand the specifics to make sure you meet the requirements.
A Chapter 7 bankruptcy involves a court-supervised procedure where a trustee will take all your assets and distribute them among your creditors. This option is available for individuals, corporations, or partnerships.
For individuals, you have an alternative in Chapter 13 where you can propose a plan to repay creditors over 3 to 5 years. You remain in possession of your assets and make payments to your creditors through the trustee.
Corporations can also file a petition under Chapter 11 of the Bankruptcy Code. Instead of liquidating, you can continue to operate your business and repay creditors through a plan of reorganization.
Reasons to File for Bankruptcy
Did you know that 62.1% of Americans who file for bankruptcy cite medical bills as the main contributor to their financial issues? Other reasons for bankruptcy include unaffordable mortgages and living beyond one’s means with high credit card bills and other debt. Student loans also contribute to bankruptcy filings.
Global circumstances and market demand usually impact corporations filing for bankruptcy. Some companies may run into issues because of cash management and not having enough cash to deal with the downturn of the economy or low demand.
What Is a Bankruptcy Lawyer and How Can They Help You?
A bankruptcy lawyer specializes in bankruptcy law, including preparing the documents and representing the client in court. When you work with a bankruptcy lawyer, you will start with a consultation and discussion of the payment arrangements. The lawyer will review your finances to determine the best way to move forward.
Planning for Bankruptcy
Before you even file for bankruptcy, a bankruptcy lawyer can offer advice and direction. They can work with you to find out how dire your financial situation is. They can also let you know what your options are and if filing for bankruptcy is your best option.
If you don’t have enough assets to pay off your debts, they can work with you to find alternatives. During the process of filing for bankruptcy, they can help you file the right paperwork and meet the requirements of the bankruptcy legislation.
Establish Debt Agreement
If you are entering into a plan of reorganization, they can work with you to draft a debt agreement that can help you pay off your creditors. They will negotiate with creditors on your behalf and work to find a sustainable repayment plan.
If you go to court, they can provide litigation support by advocating on your behalf. They can draft litigation documents, present oral arguments, and negotiate as needed.
Financial and Legal Advice
A bankruptcy lawyer has dealt with many clients in different financial situations, and they can bring this expertise to you. They can provide one-off financial or legal advice and help you simplify a complicated situation.
Once you file for bankruptcy, the work doesn’t end. You could run into issues with following the repayment plan over time or with creditors who are not following the procedure. A bankruptcy lawyer can help you deal with any post-bankruptcy concerns.
Fraud Issues You Can Run
If you choose to deal with the bankruptcy on your own, you can run into issues. These red flags during the bankruptcy process can result in additional litigation, delays, or even increasing your debts.
When you file for bankruptcy, you need to be honest and completely transparent about your finances. If you end up hiding assets or providing misleading information, it could be considered bankruptcy fraud.
Hidden or Undervalued Assets
The most common type of bankruptcy fraud is hiding or undervaluing your assets. This could be a simple mistake if you are unclear about your financial situation. Having a professional review your finances and value your assets can help reduce the risk of dealing with this type of bankruptcy fraud.
Misleading Financial Information
Misleading financial information could be wide-ranging, including misleading payroll information or customer invoices. There could be inconsistencies in your current finances compared to your financial statements or tax returns. Any information that is seen as misleading could end up dragging out the bankruptcy process.
Recent Transfer of Cash or Assets
You may think it’s okay to give that real property or cash as a gift. The problem is that the bankruptcy rules are very clear about transfers of property or cash. The movement of assets, especially between related corporations, could be seen as fraudulent and a means to avoid paying creditors their fair share in a bankruptcy proceeding.
Preferential Payment to Creditors
Before making any payments to creditors, you need to know that bankruptcy law prohibits favoring one creditor over another. If you make a preferential payment to a creditor, the bankruptcy trustee could recall the payment within 90 days. Any payments to management or close relations are seen as preferential and will raise red flags.
Top 10 Benefits of Hiring Bankruptcy Attorneys
Bankruptcy lawyers can provide many benefits, especially when dealing with a complex bankruptcy with many creditors. They can assist in everything from a financial review before bankruptcy to assistance post-bankruptcy. Knowing these benefits can help you decide whether a bankruptcy lawyer is beneficial for your particular situation.
1. Guide Through the Legal Process
Attorneys for bankruptcy can help guide you through the legal process. The bankruptcy rules can get complicated with many deadlines and important paperwork. If you work on it yourself, you could miss deadlines, which could delay the process.
To address all the concerns of bankruptcy law, you want to understand creditor remedies, debtor protection, secured creditors, and collection requirements. Understanding the decision by the courts can also help you determine what your options are. Rather than doing this research, you can work with a bankruptcy lawyer who has the background and experience to help you work through these difficult concepts.
2. Evaluate Your Financial Situation
An important element of coming up with a plan to deal with bankruptcy is to understand your financial situation. While you may be fully aware of your finances, sometimes, we are just too close to see the full picture. You need a fresh set of eyes to review your finances.
Experienced bankruptcy attorneys have dealt with many different types of bankruptcies. They can spot issues and solutions where you might miss them. They also work closely with financial planners and accountants and can conduct a full analysis of your finances.
3. Offer Alternatives
If you are considering bankruptcy, you need to think about what alternatives are available. Whether it’s filing for bankruptcy or coming up with a plan of repayment, you need to understand what your options are. These options can also have nuances that you may miss without a background in bankruptcy law.
This is why you want to consider hiring attorneys for bankruptcy. They will assess your situation and provide you with alternatives that work for your situation.
Filing for bankruptcy has a lot of negative impacts on your life, including negative credit reports and difficulty getting loans in the future. If you have the option to not file for bankruptcy, you should take it. Your bankruptcy attorney will help you with alternatives.
4. Protect Your Property and Assets
When you file for bankruptcy, all of your property and assets are in the hands of a trustee in bankruptcy. They decide how to liquidate those assets and distribute them to your creditors. The rules ensure that you can’t just transfer property before filing for bankruptcy to hide assets.
If you end up transferring property as a gift or business transaction, you could be dealing with fraud in bankruptcy. If you are in a situation where you need to enter into any transactions, you should consider getting advice from a bankruptcy lawyer. They can help you determine how to protect your assets before and during the filing process for bankruptcy.
5. Negotiate With Creditors
One of the most important parts of bankruptcy is to negotiate with creditors. Most people file for bankruptcy because they don’t have enough assets to cover their liabilities. The goal of filing for bankruptcy is to pay the creditors a portion of the amount owed and start afresh.
In some cases, you can enter into a repayment plan with creditors based on what amount you can repay. A bankruptcy lawyer can negotiate with creditors on your behalf and get you the best repayment plan.
You can negotiate on your own, but you could be taking a risk with your future. An experienced lawyer knows what the baseline is and what others have paid in similar circumstances. They can put your best foot forward and find the best settlement for your needs.
6. Avoid Collection Calls
The worst part of unpaid debt is dealing with the harassment of collection calls. They can call you at all hours and even try to intimidate you.
It’s not just about getting calls; but you might even have to face harassment on texts and social media. They could reach out to your friends and neighbors, which can be potentially embarrassing.
It’s important to know that debt collectors must follow certain rules and can’t harass, bully or intimidate you. The Fair Debt Collection Practices Act sets out rules that ensure debt collectors cannot make repeated or continuous calls or try to harass, oppress or abuse you. Debt collectors cannot call you seven times in a row or within 7 days of speaking with you on the phone.
Getting 6 calls in a row can still feel like harassment. Once you involve a bankruptcy lawyer, they can help you by reaching out to collection agencies and protecting you from harassment.
7. File Paperwork
Paperwork plays an important role in bankruptcy proceedings. You can do your research and file the paperwork. But the learning curve can be steep, and it can get pretty stressful dealing with it on your own.
Working with a bankruptcy attorney means taking a breath and not worrying about paperwork. You can rely on their expertise to file the right paperwork on time and accurately.
8. Save Costs Long Term
If you are dealing with bankruptcy, expenses are top of mind. You don’t want to add more costs to your already heavy debt. That’s probably why you don’t want to hire a bankruptcy attorney.
Remember that an experienced professional lawyer can save you money in the long term. Rather than thinking of it as an expense, you should consider it an investment. They can work with you to find the best and lowest settlement so you enter into a sustainable repayment plan in the long term.
Bankruptcy is to give you a fresh start so you are not weighed down by debt. A sustainable plan ensures that you get out of your bankruptcy situation and rebuild your life. You want to make sure that you don’t enter into bankruptcy a second time with the help of a bankruptcy attorney.
9. Avoid Litigation
Bankruptcies usually don’t end up in the court system. With the right paperwork and a court-approved plan, you don’t need to enter into a lengthy court battle with creditors. Unfortunately, that’s not always the case.
You can make sure that you avoid litigation and simplify the process by working with a bankruptcy attorney. They can manage your documentation and negotiations to ensure that you don’t have to prolong the process and deal with complicated litigation in court.
10. Get Peace of Mind
One of the biggest benefits of hiring a bankruptcy lawyer is the peace of mind that you can get knowing that you are supported by an experienced professional. You can rest assured that there is someone on your side looking to protect you and your future.
What to Look For in Bankruptcy Attorneys?
It’s difficult to find the right lawyer among the experts in your area. Sometimes it’s hard to distinguish between all the lawyers and law firms. There are certain skillsets that you should be looking for in your bankruptcy attorney.
First, you need to look for prior experience in the area. Ask more questions about their background and the kind of clients they have worked with. Get more information about the types of settlements and repayment plans they have had the opportunity to work on.
You want to make sure that they have the right experience working with similar clients and files. This is especially important because this experience can guide you in the right direction. It also gives you a good sense of their advocacy and negotiation expertise.
Your bankruptcy lawyer should be enthusiastic about bankruptcy law and your case. You should feel comfortable with their attitude and experience. They should be enthusiastic about your chances and advocate zealously on your behalf.
You should also confirm that your lawyer has the time to dedicate to your case. If they are too busy or have a heavy workload, they could miss deadlines or make mistakes. You want someone who can put in the time and effort needed for your financial success.
Attention to Detail
With the amount of paperwork and deadlines involved, you want your lawyer to have good attention to detail. They should be able to spot errors and put their best foot forward on your behalf.
Good Communication Skills
You want your lawyer to be frank and up-front about your chances. They should be able to explain the complex nuances of the law in clear terms. No matter how many questions you have, they should be enthusiastic, clear, and committed.
What to Expect When You Hire a Bankruptcy Attorney
Once you hire a bankruptcy attorney, you can take a deep breath and relax. But first, you need to complete an initial consultation. An initial consultation allows you to see how well you work with the lawyer.
In an initial consultation, the lawyer will have a list of questions for you. They will try to get an understanding of your financial situation to give you an honest assessment of your options. You need to be prepared to get the most out of your time with the lawyer.
The initial consultation is an interview for both sides. You need to assess the lawyer and see whether they are the right fit for you. A positive rapport can make a huge difference in the success of your case.
Review Your Financials
A complete understanding of your assets and liabilities is the next step in determining the options available to you. Some questions and documents you need to consider keeping on file are:
- Unpaid tax debts
- Prior tax returns
- Financial statements
- List of creditors and liabilities
- Vehicles and property owned
The more information you have, the better your assessment will be. Depending on how complex your situation is, this can take time. You may have a team of lawyers and accountants review your finances to determine the next step.
During this time, you want to make sure that you are communicating with your lawyer. Ask many questions, including what the process is and what the deadlines are. These questions can help clarify your next steps and give you some peace of mind.
Discuss Your Options
Your lawyer can provide you with the different options available to you once they have a good idea about your financial situation. In some cases, bankruptcy may be the only option. In others, you may have the choice to enter into a court-approved plan of reorganization with your creditors.
Contact Your Bankruptcy Attorney Today
The benefits of hiring bankruptcy attorneys are wide-ranging, from technical expertise to peace of mind. You can take a breath and rest assured that you have someone in your corner fighting for you. Your long-term success depends on strong bankruptcy attorneys for hire.
Are you considering filing for bankruptcy? If you are stuck in a hole and looking for options, contact us for your free consultation. We protect and support your business by designing a strategy that fits your needs.