One question we occasionally hear is “How does someone who is going bankrupt afford an attorney?” At Morrison Law Group, we understand the how tight many of our client’s finances are, and offer a number of payment plans and options to ensure they can afford to file.
When it comes to the complex world of bankruptcy, the reality is you really can’t afford not to have an attorney. In many cases, you get one shot at filing a bankruptcy and if you’re not completely aware of the process, you could cost yourself a lot of money and heartache.
One example that comes to mind when I think about this issue comes from a case where a debtor filed a bankruptcy with an inexperienced attorney. We happened to be sitting in court one day and the debtor and his attorney were brought before the judge by the trustee. The debtor had $16,000.00 in his bank account on the day he filed and the trustee wanted the money turned over to pay creditors. The first issue is that his attorney should have verified that his bank balance was low as money is the bank is usually not exempt (protected). However, in this case, all of the money was from a federal student loan he had recently incurred.
What his young and inexperienced attorney didn’t know is that a federal exemption found in 10 USC 1095(a) exempts student loan money from the bankruptcy estate. Had the attorney advised his client to claim that exemption, the bankruptcy Trustee never could have taken it. Instead, a bankruptcy judge later ordered the debtor to turn over the $16,000.00 to the trustee. With the permission of the attorney, we stepped into the case and eventually got the trustee to back off.
Another example came from a debtor who was trying to do a loan modification on his home and when the bank would not agree, he filed a chapter 13 bankruptcy to save his home. The attorney this debtor used was unfamiliar with how the Chapter 13 process works and when she could not get the case approved by the court, she advised the client to convert to a Chapter 7 bankruptcy. The problem was that he owned a classic corvette worth more than $30,000. The Debtor quickly learned that the vehicle was not protected in a chapter 7 bankruptcy which was not protected and the Chapter 7 trustee wanted to take the vehicle and sell it. He contacted us but by the time he did, there was nothing more we could do and he lost the car. Had he hired a qualified attorney first, all of this could have been resolved.
There are many pitfalls in the bankruptcy process and you should always consult with an experienced bankruptcy attorney to help you determine the best course of action and avoid costly mistakes.