Most individuals and companies considering bankruptcy are facing a great deal of financial stress; and because of the growing number of online resources and self-help books, more debtors are contemplating whether or not they actually need an attorney to file for bankruptcy. Whether it is business or consumer bankruptcy, a debtor should consider the risks associated with self-representation, their ability to review and complete the bankruptcy process, and any collateral property issues when deciding when to hire a bankruptcy attorney.
Pro se representation is when someone decides to represent himself in any lawsuit. When the stakes are low, like in a small claims court, self-representation carries a lower risk factor. Bankruptcies that involve only unsecured debt and no property tend to be more low-risk bankruptcies. Unsecured debts are bills or accounts that are not backed by an interest in property such as a credit card bill.
A mortgage, on the other hand, is secured by the house. The more property involved, the more complex the bankruptcy paperwork and the higher the risk of making a mistake. If a debtor owns property, he or she could lose property interest or remedies if all of the necessary paperwork is not properly completed.
Hiring an attorney for any lawsuit is generally a good idea. Hiring a bankruptcy attorney is a particularly good idea if the risk factor involved in the bankruptcy is high or a person’s comfort level with bankruptcy forms is low. It is also helpful if there are certain situations that could impact the success of a bankruptcy filing. For personal bankruptcy, several situations would increase the need for a bankruptcy attorney: If a debtor owns property like a home or an automobile, an attorney can ensure that the property the person wants to keep is protected. Failure to list a piece of property correctly or failure to claim the proper exemption can result in loss of that property. If a debtor does not want to keep a home, a bankruptcy attorney can also help develop a plan to dispose of the property such that a creditor can no longer pursue the person for the debt and his tax liabilities are minimized.
A bankruptcy attorney can also advise of any overlap with other civil suits that a person may be facing, like divorce or a personal injury/car wreck law suit. In addition, if a debtor knows that he may be getting a settlement in a personal injury lawsuit, the settlement could have a significant effect on his bankruptcy. Similar issues apply to a business bankruptcy.
Businesses usually face two main options before bankruptcy: restructuring or dissolution. If a business simply wants to restructure debt and keep property so that they can continue to operate, a bankruptcy attorney can impact a reorganization plan. If a business no longer wants to operate after the debts are discharged in bankruptcy, a bankruptcy attorney can make sure that all debts are resolved so that creditors cannot pursue owners in their individual capacity after the bankruptcy is finalized. When some businesses are in a financial crunch, they enter bankruptcy to shed debt to become financially fit for resale. A bankruptcy attorney is not only critical to resolving debt issues, but also for defending lawsuits by creditors that oppose how the company is sold.
The bankruptcy court cannot require a debtor to hire an attorney in a bankruptcy action. However, the bankruptcy court can and will require that a person understand and follow all of the same rules as a bankruptcy attorney. Bankruptcy is an overlap of bankruptcy law, federal rules, administrative rules, and local court rules and bankruptcy filings tend to be very paper intensive. If a person or company enters bankruptcy pro se, and then realizes they do need representation, a debtor can always hire an attorney to come in and finish the bankruptcy. However, many attorneys will actually charge more to come in and fix a messy filing.
Self-representation is tempting, especially in an age of self-help but the decision to hire a bankruptcy attorney should not be taken lightly. Once a bankruptcy is filed and completed, a debtor must wait several years before he can file for bankruptcy again. Once the final discharge order is signed, the bankruptcy is over. Bankruptcy is an opportunity for financial relief that should not be squandered with less than adequate representation.