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5 Bankruptcy Questions To Ask Your Local Attorney Before Hiring Them

You're underwater on your debt and maybe considering bankruptcy. Before you hire your local attorney, here are the top bankruptcy questions you'll want to ask.worried woman looking at finances

The bills just keep piling up.

The total debt you owe keeps increasing.

The calls, letters, and emails just won't end.

Does any of this sound familiar to you?

70% of Americans admit they are currently struggling financially, so this is a common problem people are facing today.

So where do you turn for help in this situation?

There are all kinds of places you could turn to but the best thing you can do is to look to a bankruptcy law firm to meet with a lawyer.

Asking the right questions is a great way to choose the right lawyer and make the decision as to whether or not you should file for bankruptcy.

If you're wondering what questions to ask when you meet with a lawyer, here are the top five.

1. What Is Your Experience in the Field of Bankruptcy?

Bankruptcy is an extremely complex area of law, and if you decide to use it, you'll want to make sure you choose an attorney who knows what they're doing.

A great way to gauge an attorney's abilities is by asking questions about his or her experience in the field of bankruptcy law.

You'll want to find an attorney who has practiced bankruptcy law for years, and you'll want to ask about the types of bankruptcy he or she specializes in.

You can also ask the attorney how many cases he or she has handled and completed. And ask about the attorney's track record with the results of these cases.

Basically, you want to find an attorney who is highly experienced, competent, and passionate about bankruptcy law. Finding one that specializes in the type you'll end up using is also important.

After you explain your situation, you could also ask if he or she has handled similar cases in the past and what the results of those specific cases were.

2. What Is the Difference Between Chapter 7 and Chapter 13?

The two most common types of consumer bankruptcy filings are Chapter 7 and Chapter 13. You should aim to understand the key differences between the two before deciding whether to use bankruptcy as a way out of debt.

To learn these differences, you should ask the attorney to explain each of them to you. Here is a breakdown of some of the key points.

Chapter 7

Chapter 7 offers a way to completely eliminate debts you owe through a discharge of the debts you have. If you use Chapter 7, any debts that qualify will be forgiven.

The debts that generally qualify include the following:

  • Credit card balances
  • Medical bills
  • Personal loans
  • Deficits on car loans

There are also debts that would not qualify for forgiveness, and these are called priority debts. Priority debts include IRS tax debts, student loans, alimony, child support, and certain types of court-ordered debts.

To receive forgiveness of debts through this Chapter 7, you take the risk of losing assets. This includes your house, car, cash in the bank, and other valuable assets.

If you use this chapter, your lawyer will try to exempt as much of your property as possible. Exempting property stops a court from having the legal right to seize the items and there are all kinds of rules relating to your rights with this.

Chapter 7 generally works great for people in the following situations:

  • People who owe money mainly for qualifying debts
  • People who do not have a lot of assets
  • People who do not earn a lot of money
  • People who are not facing foreclosure and wanting to stop it from occurring

Chapter 13

Chapter 13 is very different in many ways but the main difference is the way it handles your debts. Instead of providing instant forgiveness for your debts, Chapter 13 places you on a repayment plan to help you pay off some or all your debts.

The payment plan you have is based on the income and debts you have. It basically works by providing structure to the way you pay off your debts. When you complete the plan, you will no longer have any past-due debts.

Chapter 13 generally works great for people in the following situations:

  • People who earn a decent and steady income
  • People who owe money for debts that are not qualifying for a discharge
  • People on the verge on foreclosure who want to stop it from going through
  • People trying to stop a car repossession from taking place
  • People who do not qualify for Chapter 7

3. Which Type Should I Use?

After hearing the key points of each Chapter and the differences in these two options, ask the attorney which one you should use. To give you an answer, the attorney will use two different techniques.

The Means Test

The means test is a standard test used by bankruptcy attorneys in all states to determine a person's eligibility to use Chapter 7 bankruptcy.

The mean test compares the income you earned to the average income earned in your state. It also factors in differences of income by the size of a family.

In 2020, the average income in Washington D.C. was $62,285 for a family of one and $113,034 for a family of two. It increases as family size increases.

If you have a family of two, you would qualify for Chapter 7 only if you earn less than $113,034. If you earned more than this amount, you would not qualify for Chapter 7 but would qualify for Chapter 13.

An Evaluation of Your Financial Situation

Secondly, the lawyer will have to view your financial situation to determine what needs you have for debt-relief.

You might qualify for both Chapters but one will probably offer more benefits than the other and this would be the Chapter the lawyer would recommend using.

The lawyer may also talk to you about the common signs of financial distress to see how many you can relate to as well. These signs are great indicators of whether you could benefit from bankruptcy or not.

4. How Long Will it Take?

Another good question to ask is how long the bankruptcy case will take, and the answer to this depends on two main things:

  • The type of bankruptcy
  • The complexity of your case

A Chapter 7 case goes much faster because there is less involved and no payment plan to work through. In many cases, a person is able to complete a Chapter 7 case in only six months from start to finish.

If the case has complicated issues involved, it may take around a year or so from start to finish.

A Chapter 13 case takes longer because of the repayment plan, so you should expect it to take a minimum of three years and a maximum of five years.

5. Is Bankruptcy a Good Option for Me or Should I Look Into Alternative Options?

Finally, you should discuss alternative options with the attorney as there may be one that would offer great results without the use of bankruptcy.

Debt negotiation is one option the lawyer might discuss with you.

This is a method that allows you to settle your debts for a fraction of the amounts you really owe. This works well when you owe money to creditors who are willing to settle.

Credit counseling is another alternative to talk to the lawyer about Through this option, you work with a credit counseling expert who creates a plan for you to repay all your debts.

The plan often involves negotiating interest rates and balances. You make one payment a month and are able to repay all your debts in a certain amount of time - typically five years or less.

As you compare your options, you should evaluate the cost of each, the time frame each would take, and the pros and cons of each. You should also consider the implications of each option on your credit score.

Comparing your options like this is the best way to find the perfect solution for your financial problems.

How to Learn More About Your Personal Situation by Asking the Right Bankruptcy Questions

Asking the right bankruptcy questions when hiring a lawyer is important as this is how you can find the answers you need to make an informed decision.

Your financial situation is unique, which means you'll need to talk one-on-one to an attorney to learn more about your options, the challenges you might face, and the pros and cons with filing.

Contact Guardian today to set up a consultation appointment with an experienced lawyer and check out our blog for more information on bankruptcy and alternative options.