Hiring a Bankruptcy Attorney: Is it Worth It?

Filing for bankruptcy can be an overwhelming process. While individuals have the right to file for bankruptcy without an attorney, the expertise and advocacy of a qualified attorney can make all the difference when going through the financial and often emotional stress involved.

From deciphering intricate legal jargon to strategizing the best approach for your unique situation, hiring an attorney specializing in bankruptcy law is not just beneficial—it’s crucial. Keep reading to learn more about the benefits of hiring a bankruptcy attorney.

Understanding Bankruptcy

Bankruptcy is a legal process designed to provide relief to individuals and businesses burdened by overwhelming debt. At its core, bankruptcy allows debtors to either reorganize their finances and repay creditors under a court-approved plan or to liquidate assets to satisfy debts, offering a fresh financial start.

There are several types of bankruptcy, each tailored to different circumstances and objectives.

Chapter 7 bankruptcy involves liquidating non-exempt assets to settle debts.
Chapter 13 bankruptcy allows individuals with a regular income to restructure their debts through a manageable repayment plan over several years.
Chapter 11 bankruptcy allows businesses to reorganize debts and operations while continuing to operate under court supervision.

In 2024, bankruptcy filings have risen steadily. Non-business bankruptcy filings have increased 16%, while business filings have increased 40%. Despite these recent increases, filings are still down compared to their peak in December 2010, when they reached 1.6 million.

Bankruptcy in California

Bankruptcy in California shares similarities with bankruptcy laws in other states but includes some unique aspects and considerations.

Exemption Laws

One of the most significant differences lies in the exemptions available to debtors. California has its own set of exemption laws that determine which assets individuals can protect from liquidation during bankruptcy proceedings. These exemptions include protections for homesteads, vehicles, personal property, retirement accounts, and other assets, and they are often more generous than federal bankruptcy exemptions.

Community Property State

California is a community property state, which means that debts and assets acquired during marriage are generally considered community property and may be subject to division in bankruptcy proceedings. This can impact how debts and assets are treated during a bankruptcy filing, especially in Chapter 7 or Chapter 13 cases.

Means Test

Like other states, California debtors must pass a means test to qualify for Chapter 7 bankruptcy. This test determines whether their income is low enough to discharge debts through liquidation. However, the specific thresholds and calculations used in the means test may vary slightly compared to other states.

Bankruptcy Courts

California has several bankruptcy courts in different regions of the state. Each court operates within its jurisdiction and follows both federal bankruptcy laws and local procedural rules.

Homestead Exemption

California’s homestead exemption is notably advantageous for homeowners facing bankruptcy. The state allows debtors to exempt a substantial amount of equity in their primary residence, which can help protect their home from liquidation in Chapter 7 bankruptcy.

Chapter 13 Plans

In Chapter 13 bankruptcy, debtors in California must propose a repayment plan to the bankruptcy court that outlines how they will repay creditors over a three- to five-year period. This plan must comply with local rules and be approved by the bankruptcy trustee and court.

How a Bankruptcy Attorney Can Help You

Navigating the different bankruptcy options requires a comprehensive understanding of bankruptcy laws, which vary depending on jurisdiction. Legal counsel specializing in bankruptcy law can provide invaluable guidance, ensuring that debtors adhere to procedural requirements, understand their rights, and maximize the benefits of bankruptcy protection. Moreover, attorneys can negotiate with creditors on behalf of their clients, minimizing potential losses and facilitating smoother proceedings.

Beyond the legal intricacies, bankruptcy entails significant emotional and financial implications. It demands careful consideration of long-term consequences and strategic planning to achieve the best possible outcome. By demystifying the complexities of bankruptcy and empowering individuals and businesses with knowledge, a bankruptcy lawyer can help you approach the process with greater confidence and clarity.

Guidance and Expertise

Bankruptcy law is intricate and varies significantly depending on the type of bankruptcy (Chapter 7, Chapter 13, Chapter 11) and jurisdiction. An experienced bankruptcy attorney has in-depth knowledge of these laws, ensuring you adhere to all legal requirements and take advantage of available protections and benefits.

In addition, every bankruptcy case is unique and influenced by factors such as income, assets, debts, and goals. A bankruptcy attorney can assess your specific financial situation, evaluate alternatives to bankruptcy if applicable, and recommend the most suitable course of action tailored to your needs.

Filing for bankruptcy also involves extensive paperwork and adherence to court procedures. A bankruptcy attorney understands the procedural requirements, deadlines, and paperwork involved in the process. They can prepare and file documents accurately and on time, minimizing the risk of errors that could delay or jeopardize your case.

Protect Your Rights

Once you file for bankruptcy, creditors must cease all collection efforts against you, including harassing phone calls, lawsuits, wage garnishments, and repossessions. A bankruptcy attorney acts as your advocate, handling communications with creditors and ensuring your rights are protected throughout the process.

In some bankruptcy cases, particularly Chapter 13 and Chapter 11, court appearances are required. A bankruptcy attorney represents you in court hearings, negotiations with creditors, and meetings with trustees. Their presence and advocacy can significantly influence the outcome of these proceedings.

Avoid Costly Mistakes

Mistakes in bankruptcy filings or decisions can have serious consequences, potentially leading to the dismissal of your case, loss of assets, or denial of debt discharge. A bankruptcy attorney helps you avoid these pitfalls by providing informed advice and guidance based on their expertise.

More specifically, bankruptcy law provides exemptions that protect certain assets from liquidation. A skilled attorney can help you maximize these exemptions, allowing you to retain more of your property while still obtaining debt relief.

Need Bankruptcy Help?

If you are facing bankruptcy, hiring a bankruptcy attorney is an investment in your financial future. At The Gorski Firm, our knowledge, experience, and advocacy can make a significant difference in the outcome of your bankruptcy case, providing you with peace of mind and the best possible chance for a successful financial recovery.

Our founder, Vincent Gorski, is a State Bar of California Board of Legal Specialization Certified Bankruptcy Specialist. We are centrally located in Bakersfield, with convenient access to the entire San Joaquin Valley.