November 23, 2017

Bankruptcy FAQs

We know what to do when a pipe bursts or a tooth chips, but most of us are navigating uncharted waters when it comes to dealing with financial hardship in an orderly way. Layer on a thick dose of social shame, and it’s no surprise that people often wait longer than they should to seek professional guidance.

Here are a few commonly-asked questions with answers designed to start you on the path to clarity.

Q:  I don’t want to go bankrupt. It’s the last thing in the world I would consider. Can a bankruptcy attorney help me avoid filing bankruptcy?

Most definitely. A bankruptcy attorney has the training and experience to evaluate your situation holistically and help you prevent mis-steps. I am available to counsel you on your legal rights and, if appropriate, provide you with asset planning and protection strategies to implement while you restructure your financial life. People too often consult me much later than they should, which limits their options.

The financial world is full of loopholes and pitfalls that the average person can’t possibly keep up with. A bankruptcy lawyer’s job is to know them.

Take, for example, a married couple filing for bankruptcy protection who had significant equity in their marital residence, but had fallen behind on their mortgage payments. They voluntarily moved out of their marital residence, knowing that they were behind in payments and would probably face a foreclosure at some point. If they had consulted with me before doing so they would have learned about the North Carolina homestead exemption, which protects up to $ 35,000.00 in equity for the husband, and up to $35,000 in equity for the wife (your name must be on the deed, this must be your primary residence (not an investment property), and you must actually live there in order to claim it. Because they moved out of the house, it was no longer their homestead and they forfeited their right to their equity stake. These are the kinds of issues with which experienced bankruptcy attorneys can assist.When in doubt about timing and other legal issues, ask a bankruptcy attorney.

Q: If I am thinking about filing for bankruptcy and wish to consult a bankruptcy attorney for advice, where should I start?

As a general rule, I advise callers to look for an attorney where they live or work, for practical reasons. I meet with debtor clients at least twice prior to filing, and often several times, and it is generally easiest for clients to meet with an attorney who practices near their home or place of business. Further, all debtors are required to attend a hearing after the filing of the bankruptcy petition; again, it makes sense to attend a hearing at the local bankruptcy court.

Sometimes, the question of where to go for advice and filing is a no-brainer. For example, if a caller lives in North Carolina or South Carolina, and either lives or works in the Charlotte area, and has no plans to move, then it makes good sense to call a Charlotte area bankruptcy attorney. However, if a caller lives in another state, or in a distant part of North Carolina, but owns real property in the Charlotte area which is in foreclosure, it is not so obvious. In this circumstance, I recommend that callers start by consulting with a bankruptcy attorney in their hometown.

If a caller intends to relocate to the Charlotte area in the near future, and isn’t facing any time-sensitive legal problems, then it may make the best sense to consult with a Charlotte-area attorney after the move.

Q: How much does it cost to file for bankruptcy?

This requires a two-part answer. First, filing fees must be considered. Second, if you wish to hire an attorney to file and handle your bankruptcy case, then you must consider attorney’s fees. Because these fees change from time to time, please refer to the information here. 

Chapter 7 attorney’s fees vary from office to office, are usually a flat fee, and are based on a variety of factors, including the complexity of the case, the experience level of the attorney, whether there is one debtor or co-debtors (typically, a husband and wife who both need to file), whether the debtor is self-employed, and whether the debtor owns significant property or is involved in multiple lawsuits.

I generally charge a minimum attorney fee of $2000.00 for a simple Chapter 7 bankruptcy case; fees increase based on the complexity of the case. I require that both the filing fee and the entire attorney’s fee be paid, in cash or certified funds, prior to the filing of the petition. I occasionally handle a Chapter 7 bankruptcy filing on an hourly fee basis, where it is hard to predict how much legal work will be required throughout the bankruptcy case.

Chapter 13 attorney’s fees are set by the bankruptcy court for base fee services, a defined set of usual work done in Chapter 13 cases.

In a Chapter 13 case, unusual work, known as “non-base fee” work, is usually charged at a separate hourly rate agreed to by the client and the attorney prior to the bankruptcy filing. Most attorneys require that a portion of the base fee be paid prior to the bankruptcy filing, with the remaining fee included in the monthly plan payments made by the debtor to the trustee.

Chapter 11 attorney’s fees vary from attorney to attorney, and are generally provided at an hourly rate (not a flat fee rate). Chapter 11 attorney’s fees generally cost at least $15,000.00 over the life of the case.

I generally require an advance fee deposit of at least $10,000.00 to file a Chapter 11 case, and will require additional deposits or payments during the life of the case, as needed.

Q:  I am a small business owner and want to let the business go bankrupt so I don’t have to file personally and force my spouse into filing. Is this possible?

Business owners often co-mingle their business assets with personal assets, and often don’t understand that in many circumstances the business is a legally distinct and separate entity, not to be confused with its owner. This post describes a process that works efficiently when it is appropriate, called “Collapsing the Corporation.”

I can review a small business’s finances, and its owner(s) finances, to determine who is liable for what, and whether a bankruptcy would be beneficial for anyone concerned. My best advice is to call us to discuss your particular circumstances and whether a bankruptcy consultation is appropriate. If you hire me to represent you, I will bill you for this consultation; if not, there is no charge.

Answers to the following two questions may be of help, too.

Q: What individuals may be a good candidate for bankruptcy?

Bankruptcy may be an appropriate remedy for individuals who are generally unable to pay their debts as they become due. Circumstances that tend to indicate that bankruptcy might provide some debt relief include one or more of the following:

  • repossession of a car, truck, boat, or other vehicle
  • sixty days or more past due on one or more mortgages
  • past due balances on one or more credit cards
  • one or more outstanding judgments
  • receipt of a lawsuit for money owed
  • unpaid tax obligations (regardless of the type of tax)
  • inability to obtain credt
  • balances owed on credit cards, which total fifty percent or more of total household income
  • one or more outstanding loans against retirement plans
  • one or more outstanding personal guaranty of a debt undertaken by a failed or failing business
  • significant losses in a Ponzi or other investment schem
  • mortgage(s) on real property, the monthly payments for which exceed 35% of total household income
  • divorce or separation that involves significant joint debts
  • unemployment, death or illness of spouse, or other significant reduction in income, without six months or more of living expenses in savings
  • illness or injury resulting in significant medical debt

While one of these factors alone may provide a good-faith basis for filing for bankruptcy protection, the presence of multiple factors increases the likelihood that a bankruptcy consultation may be beneficial. Conversely, it does not automatically follow that an individual experiencing one or more factors should file for bankruptcy protection. An experienced bankruptcy attorney can help with this evaluation.

Q: What businesses may be a good candidate for bankruptcy?

Two common circumstances in which a financially troubled business may wish to consider a bankruptcy filing are (1) when a business offers a product or service for which there is a market, but needs some time to refinance or otherwise satisfy debt and creditors, and (2) when a business has an unmarketable product or service but also has assets to liquidate for the benefit of creditors. There are other circumstances, too numerous and fact-specific to list here.

If I am thinking about filing for bankruptcy and wish to consult a bankruptcy attorney for advice, where should I start?

As a general rule, we advise callers to look for an attorney where they live or work, for practical reasons.  We meet with our debtor clients at least twice prior to filing, and often several times, and it is generally easiest for clients to meet with an attorney who practices near their home or place of business.  Further, all debtors are required to attend a hearing after the filing of the bankruptcy petition; again, it makes sense to attend a hearing at the local bankruptcy court.

Sometimes, the question of where to go for advice and filing is a no-brainer.  For example, if a caller lives in the Charlotte area, works in the Charlotte area, and has no plans to move, then it’s logical to call a Charlotte area bankruptcy attorney.  However, if a caller lives in another state, or in a distant part of North Carolina, but owns real property in the Charlotte area which is in foreclosure, it is not so obvious.  In this circumstance, we recommend that callers consult with a bankruptcy attorney in their hometown.  Further, if a caller intends to relocate to the Charlotte area in the near future, and isn’t facing any time-sensitive legal problems, then it may make the best sense to consult with a Charlotte area attorney after the move.

How much does it cost to file for bankruptcy?

This requires a two-part answer.  First, filing fees must be considered.  Filing fees are charged by the bankruptcy court and are due upon filing; these fees help fund the bankruptcy court system.  The filing fee for a Chapter 7 bankruptcy is $299.00; for Chapter 13, $274.00; and for Chapter 11, $1039.00.

Second, if you wish to hire an attorney to file and handle your bankruptcy case, then you must consider attorney’s fees.

·Chapter 7 attorney’s fees vary from office to office, are usually a flat fee, and are based on a variety of factors, including the complexity of the case, the experience level of the attorney, whether there is one debtor or co-debtors (typically, a husband and wife who both need to file), whether the debtor is self-employed, and whether the debtor owns significant property or is involved in multiple lawsuits.  Our office generally charges an attorney fee of no less than $1500.00 for a simple Chapter 7 bankruptcy, and usually charges between $2000.00 and $3000.00 for more complex Chapter 7 bankruptcies.  Our office requires that both the filing fee and the entire attorney’s fee be paid prior to the filing of the petition.  Rarely, we will agree to handle a Chapter 7 bankruptcy filing only on an hourly basis.  This usually winds up being more expensive to the client than a flat fee.

·Chapter 13 attorney’s fees are set by the bankruptcy court, and are a flat fee of $3250.00 for base fee services – a defined set of usual work done in Chapter 13 cases.  Unusual work, known as “non-base fee” work, is usually charged at a separate hourly rate agreed to by the client and the attorney prior to the bankruptcy filing.  Most attorneys require that a portion of the $3250.00 base fee be paid prior to the bankruptcy filing, with the remaining fee included in the monthly plan payments made by the debtor to the trustee.

· Chapter 11 attorney’s fees vary from attorney to attorney, and are generally provided at an hourly rate (not a flat fee rate).

If I am thinking about filing for bankruptcy and wish to consult a bankruptcy attorney for advice, where should I start?

As a general rule, we advise callers to look for an attorney where they live or work, for practical reasons. We meet with our debtor clients at least twice prior to filing, and often several times, and it is generally easiest for clients to meet with an attorney who practices near their home or place of business. Further, all debtors are required to attend a hearing after the filing of the bankruptcy petition; again, it makes sense to attend a hearing at the local bankruptcy court.

Sometimes, the question of where to go for advice and filing is a no-brainer. For example, if a caller lives in the Charlotte area, works in the Charlotte area, and has no plans to move, then it’s logical to call a Charlotte area bankruptcy attorney. However, if a caller lives in another state, or in a distant part of North Carolina, but owns real property in the Charlotte area which is in foreclosure, it is not so obvious. In this circumstance, we recommend that callers consult with a bankruptcy attorney in their hometown. Further, if a caller intends to relocate to the Charlotte area in the near future, and isn’t facing any time-sensitive legal problems, then it may make the best sense to consult with a Charlotte area attorney after the move.

How much does it cost to file for bankruptcy?

This requires a two-part answer. First, filing fees must be considered. Filing fees are charged by the bankruptcy court and are due upon filing; these fees help fund the bankruptcy court system. The filing fee for a Chapter 7 bankruptcy is $299.00; for Chapter 13, $274.00; and for Chapter 11, $1039.00.

Second, if you wish to hire an attorney to file and handle your bankruptcy case, then you must consider attorney’s fees.

·Chapter 7 attorney’s fees vary from office to office, are usually a flat fee, and are based on a variety of factors, including the complexity of the case, the experience level of the attorney, whether there is one debtor or co-debtors (typically, a husband and wife who both need to file), whether the debtor is self-employed, and whether the debtor owns significant property or is involved in multiple lawsuits. Our office generally charges an attorney fee of no less than $1500.00 for a simple Chapter 7 bankruptcy, and usually charges between $2000.00 and $3000.00 for more complex Chapter 7 bankruptcies. Our office requires that both the filing fee and the entire attorney’s fee be paid prior to the filing of the petition. Rarely, we will agree to handle a Chapter 7 bankruptcy filing only on an hourly basis. This usually winds up being more expensive to the client than a flat fee.

·Chapter 13 attorney’s fees are set by the bankruptcy court, and are a flat fee of $3250.00 for base fee services – a defined set of usual work done in Chapter 13 cases. Unusual work, known as “non-base fee” work, is usually charged at a separate hourly rate agreed to by the client and the attorney prior to the bankruptcy filing. Most attorneys require that a portion of the $3250.00 base fee be paid prior to the bankruptcy filing, with the remaining fee included in the monthly plan payments made by the debtor to the trustee.

· Chapter 11 attorney’s fees vary from attorney to attorney, and are generally provided at an hourly rate (not a flat fee rate).