Dec 11, 2007

Using Non-Lawyers to Help You With Your Bankruptcy

If you want help in filing your bankruptcy, you can use a lawyer or a non-lawyer. The lawyer will charge you about $1200-$2000, depending on the location. The non-lawyer will charge you about 10% of the lawyer's fees -- between $125 and $200. So why would you use a lawyer instead of a non-lawyer? To begin, the non-lawyer can prepare your formal paperwork as well as a lawyer could -- in fact, most lawyers rely on non-lawyers to do all the paperwork.

The lawyer can counsel you about your various options, whereas the non-lawyer is prohibited from giving you any information about bankruptcy. That alone is a big reason to hire a lawyer, especially since bankruptcy laws prohibit non-lawyers from advising you about:

  • whether to file bankruptcy

  • which type of bankruptcy to file

  • which types of debts bankruptcy will get rid of

  • which types of property you can hold on to

  • the tax consequences of a bankruptcy discharge

  • what you should do about collateral for secured debts

  • how to characterize the nature of your interests in property, or

  • bankruptcy procedures or rights.

How to get bankruptcy information. So where would you get this information if the non-lawyer can't give it to you? Nolo's bankruptcy books are a good start, as is your favorite search engine. The federal court website has a publication -- Bankruptcy Basics -- that may answer some of your questions. Nolo's online Bankruptcy Resource Center has articles and FAQs about both Chapter 7 and Chapter 13 bankruptcy. The Legal Consumer website will help you with the means test (if you need it), as well as other useful information

Free legal consultations and flat-rate services. Many bankruptcy lawyers will give you a free consultation, which can be helpful if you have specific questions (for example, what will happen to your boat if you decide to file). Also, Affordable Attorney Advice offers a flat rate service of $100 for anyone using Nolo's book How to File for Chapter 7 Bankruptcy, or a California non-lawyer to do their bankruptcy paperwork.

The creditors' meeting -- do you need a lawyer? If you spring for the $1500 (average) for a lawyer, he or she can accompany you at the one personal appearance you are likely to make -- the creditors meeting. You must represent yourself at that appearance if you use the non-lawyer for your paperwork. Self-representation at the creditors' meeting is unlikely to have much of an adverse effect; however, it is you who must answer any questions directed your way in the creditors' meeting, and not the attorney who is representing you. Many believe that the fees charged by an attorney for an appearance at the creditors' meeting are a waste of money. You shouldn't really blame it on the attorney, however, since most bankruptcy judges require the appearance as an ethical responsibility

After the creditors' meeting. In most bankruptcy cases, nothing of consequence happens after the creditors' meeting. You have to file a single page (form 23) that tells the court you've completed budget counseling, and that's about it. Sixty days after the creditors' meeting, you should receive a notice of discharge in the mail. You may be curious about what this notice means and can ask your attorney -- if you have one -- or consult the resources mentioned earlier.

So why pay an attorney $1200--$2000 instead of a non-lawyer $125-$200? Beats me. If something weird happens in the case, you'll probably need a lawyer, but you can pick one up at that time. There's no point in worrying about the unexpected in advance.

Legal restrictions on non-lawyers. You may be curious about why non-lawyers are so restricted in what they can tell their customers if the type of advice people are seeking is so easy to find on the Internet. About twenty years ago, the attorneys who competed (and still compete) with non-lawyers lobbied Congress to pass the Bankruptcy Petition Preparer statute, which forbade the "practice of law" by these non-lawyers, as well as capping their fees at an impossibly low level. The intent of the statute was to drive the non-lawyers out of business -- and many turned their lights off.

For further help understanding bankruptcy, see Nolo's The New Bankruptcy: Will It Work for You?, by Attorney Stephen R. Elias.