In the lives of individuals and families who find themselves buried in debt, getting a fresh start through bankruptcy is one of the most important events in their financial lives. Despite how important it is and regardless of how much time they spent considering their options, there are high numbers of bankruptcy filers who fall victim to the same mistakes.
Some of the most common mistakes that are made by those considering filing or currently filing for bankruptcy are:
1. Hiring an Attorney without Enough Experience with Bankruptcy: California has no shortage of attorneys. It’s been said that the state has one of the highest ratios of attorneys to people of anywhere in the world. It could be that simple availability is behind the number one mistake made by bankruptcy filers. Too many choose an attorney without sufficient experience in bankruptcy. Each bankruptcy case will inevitably have several issues that require a substantial amount of careful handling in order to avoid problems during the filing process. If there’s a problem during the process, your bankruptcy could be thrown out, specific debts could be declared as ineligible for discharge, or filers could lose assets (the house, the car, their retirement, etc.). Bankruptcy filers should always take great care to choose an attorney who practices bankruptcy law as their main practice.
2. Working with a Bankruptcy Mill: A large portion of a bankruptcy filing is paperwork. As the competition between bankruptcy firms and attorneys is intense, some have resorted to setting up a specific approach that is best described as a “mill” approach. They do so in order to maximize their profit by increasing volume and decreasing retainers. In this situation, too many filers find themselves in a negative situation because the proper attention has not been given to their case. It’s the most important financial situation you’ll ever find yourself in; don’t trust it to someone you can’t even contact with questions because they are handling far too many cases at once.
3. Choosing to have your Bankruptcy Filing Handled by a Paralegal or Legal Document Service: This is not simply an argument against less qualified professionals handling your case. It’s actually an argument about legality. It is illegal (since 2001) for a paralegal to provide legal services directly to the public. If you are offered the services of a paralegal that is not working alongside an attorney, you are in a potentially dangerous and definitely illegal situation. Don’t consider this an option. Document preparation services were created by the California legislature in what can optimistically be viewed as an attempt to help those who need legal assistance, but simply can’t afford it. The problem is that while they may think they are getting legal assistance of a sort, they aren’t. Individuals working for these document preparation services groups are not qualified in any way. Prior to assisting with paperwork, filers are required to sign their retainer agreement which actually clearly state they are not attorneys, do not have legal education or knowledge, and cannot give legal advice. They also have no liability for mistakes made in document preparation. Those same mistakes can cost filers assets, or even have their bankruptcy denied altogether.
4. Filing Bankruptcy Without Assistance: Some individuals attempt to file bankruptcy on their own; this seems particularly common amongst filers who don’t have assets. It’s not always a horrible idea, but there are risks. Individuals who file on their own behalf must take their own calls from creditors. They have to handle their own inquiries regarding reaffirmation of debt, etc. Individuals filing on their own behalf also have to appear at their hearing on their own and answer any questions posed by the creditors in attendance. This particular moment in time is very different when there is a lawyer as a buffer between the filer and the creditors even if there aren’t any assets to argue over. If there are assets, it’s almost never a plausible option to file for bankruptcy on your own behalf.
5. Hiring an Attorney Who Assures you Bankruptcy is the Only Option: Bankruptcy is not the only alternative to financial crisis. For many, it’s the best solution to the financial problems at hand, but a good bankruptcy attorney will always provide initial advice regarding additional options to avoid bankruptcy. Bankruptcy is no one’s first choice. There are negatives attached to the process that stick with the filer for a decade or more. Your attorney of choice should advise you of this and make sure you are very clear on the after effects of filing. If they don’t go through this very vital information with you, they are most likely only in it for the retainer. Instead, you should look for an attorney more interested in providing you with excellent advice and guidance based on a thorough understanding of bankruptcy law and extensive experience.
6. Not Making Efforts to Repair Credit Immediately after Bankruptcy is Complete: When filing for bankruptcy is the best answer, it’s extremely important that filers are aware that the process doesn’t end when debts are discharged. It’s the first step. Immediately when the initial filing process is completed, filers should begin a serious undertaking to control their cash flow, enact a systemized plan for generating savings, carefully monitoring your credit report for erroneous information, and purposefully and actively generating new, good credit activity on your credit reports.
Filing for bankruptcy should be considered a once in a lifetime option. When it comes into play, make sure that you are maximizing its potential. A good attorney with attention focused on your case will guide you through the pre-bankruptcy planning, make effective use of the bankruptcy laws in order to discharge as much debt as possible and put a plan in place to systematically rehabilitate your finances and credit report after filing for bankruptcy.
At Westgate Law, this is the type of detailed attention we offer our clients. Get in touch to discuss what options are available for you and which best suits your financial situation.