Filing for bankruptcy is a daunting experience. But here’s the thing…
Knowing your legal rights during the process is what differentiates an effective fresh start from a financial mistake. And with bankruptcy filings increasing 14.2% year-over-year, the stakes for understanding how to protect yourself could not be higher.
Fortunately, the bankruptcy code is designed to protect people in financial distress. The law provides powerful tools to stop creditor harassment, give you breathing room, and get back on your feet.
In This Guide:
- What Legal Rights Do You Have in Bankruptcy?
- The Automatic Stay: Your Most Powerful Protection
- Why Working With a Law Firm Matters
- Common Bankruptcy Mistakes to Avoid
- How to Choose the Right Legal Help
What Legal Rights Do You Have in Bankruptcy?
Bankruptcy is not a hit to your credit that you must live with. It is a legal process with multiple built-in protections many people don’t realize they have.
The instant someone files bankruptcy, federal law comes into force to protect them from predatory creditors. The law applies regardless of whether the filing is Chapter 7 or Chapter 13.
Key legal rights and protections include the right to be free of harassment, the right to retain certain assets, and the right to reorganize or eliminate debts with court supervision. Working with experienced bankruptcy law attorneys like WH Law ensures these rights are utilized to their fullest and remain protected throughout the process.
Pretty powerful, right?
The good news doesn’t stop there…
The Automatic Stay: Your Most Powerful Protection
The automatic stay is one of the most significant legal protections in bankruptcy law. It goes into effect the moment a bankruptcy petition is filed.
The automatic stay is essentially a pause button on all collection activity.
Here are some of the collection actions the automatic stay stops:
- Phone calls and letters from creditors demanding payment
- Wage garnishments that take money directly out of paychecks
- Foreclosure actions against homes
- Repossession of vehicles
- Lawsuits related to debt collection
- Utility disconnections
This is one of the most immediate and important rights in the bankruptcy code. The automatic stay gives people the space they need to work through their bankruptcy case without harassment or the threat of financial ruin. Creditors that violate the automatic stay face serious legal penalties including fines.
The automatic stay remains in force for the duration of most bankruptcy cases, providing immediate relief so debtors can focus on the process rather than on fighting off creditors.
Why Working With a Law Firm Matters
Bankruptcy law is not simple. It’s pretty darned complex.
There are multiple chapters to choose from, exemptions to understand, strict deadlines, and a mountain of paperwork to file accurately. One wrong move and you could end up costing yourself thousands of dollars or getting your case dismissed entirely.
That’s why working with professional law firm services is essential for anyone thinking about bankruptcy.
Here are some of the most important things that experienced bankruptcy attorneys can do for you:
- Expert guidance on which chapter is best to file. There is a difference between Chapter 7 liquidation bankruptcy and Chapter 13 debt repayment plans. An attorney will know how to determine the best course of action for your unique situation.
- Help to protect assets from seizure or repossession. The law provides bankruptcy exemptions so people don’t lose everything when they file. But these exemptions vary by state and circumstance. A skilled attorney knows how to help you keep as much property as possible.
- Ensure all necessary documentation is submitted accurately. Bankruptcy is paperwork heavy. An error or missing form can cause a case to be denied or experience unnecessary delays. Law firms can take care of this administrative burden.
- Representation before the court when creditors file challenges or other motions. Creditors can challenge bankruptcy cases or seek relief from the automatic stay. An attorney ensures these challenges are met professionally.
The stakes are too high to do this alone.
Common Bankruptcy Mistakes to Avoid
Most people that file for bankruptcy end up making at least one major mistake. Many of these errors could be avoided with the right legal advice.
- Transferring assets before filing. It is against the law to transfer money or property to friends or family prior to filing bankruptcy. The court will reverse these transactions and may dismiss the case or even charge criminal fraud.
- Running up new debt. Incurring significant new debt just before filing is another form of fraud. The court can deny the discharge of these new obligations.
- Failing to pass the means test. There are income requirements to file Chapter 7. Not knowing these requirements and filing a case that is immediately dismissed wastes time and money.
- Missing important deadlines. Bankruptcy is a process with many strict deadlines. Missing even one deadline can cause protections to be lost or the case to be dismissed.
- Not listing all assets and debts. Bankruptcy law requires full disclosure. Hiding assets or debts is a form of perjury that can result in severe consequences.
These are just some of the most common mistakes people make when filing for bankruptcy without legal help.
How to Choose the Right Legal Help
Not all bankruptcy attorneys are the same.
Finding the right law firm can make all the difference in the world. Here are some of the most important things to look for when choosing an attorney:
- Focus on and experience with bankruptcy cases. Look for attorneys that practice specifically in the field of bankruptcy law. General practice attorneys will likely not have the nuanced expertise necessary.
- Communicates clearly and honestly. A good bankruptcy attorney will explain the process and your options in plain language. Bankruptcy is stressful enough without being confused by legalese.
- Transparent pricing. Make sure you know exactly what you are paying for in fees. Some firms charge flat rates for services while others bill hourly. Ask questions before signing a contract.
- Strong online reviews and references. Search for the firm online. Check reviews and contact former clients for references. This will give you a sense of how the firm works with its clients.
- Offers free consultations. Many bankruptcy attorneys offer no-cost initial consultations. Take advantage of these to get a sense of which firms are a good fit for you.
The relationship with your bankruptcy attorney can last for months or even years. It matters how you approach this choice.
Wrapping Things Up
Protecting your rights when filing bankruptcy is an important part of navigating the process.
Knowing the legal tools available and working with professionals that know how to use them is critical. The automatic stay gives immediate relief from creditor harassment. Federal bankruptcy law provides real protections to people in financial distress. And with individual chapter 7 filings increasing 15% from the prior year, these rights are more important than ever.
To recap:
- Bankruptcy is a legal process with multiple built-in rights and protections
- The automatic stay is one of the most immediate and important rights
- Working with experienced bankruptcy law attorneys maximizes these protections
- Costly mistakes can be avoided with professional guidance
- Finding the right law firm matters for the outcome of your case
Bankruptcy is not the end of the world. It is a legal tool specifically designed to give people a real and genuine fresh start. Understanding your rights and making sure you can exercise them is the first step to financial recovery.