Though legally possible to go through the entire bankruptcy process without outside counsel, it is often recommended that businesses and individuals retain a qualified lawyer as a guide through this overwhelming and difficult time. Bankruptcy lawyers are even known to hire other bankruptcy lawyers to handle their legal affairs when they have need of the service.
There are four basic reasons to hire a lawyer.
1. No mercy. Bankruptcy is a federal process handled through the US Bankruptcy Court system, which has no patience for a learning curve. Should an entity without an attorney miss a court date, misfile, or otherwise err throughout any of the complicated and tedious process, it receives no special treatment. Even an honest mistake can cause a case dismissal or loss of personal property.
2. Emotional distance. The process of completely wiping clean a financial slate is a trying one, and not just legally. Any person or business in need of this level of proceedings faces the emotional journey of unpaid creditors, some of whom may have been family or friends. There is also the possibility of a lifestyle change, due to the challenge for the debtor to obtain future home, car, or business loans. Most likely, the debtor’s time is best spent tending to the personal upheaval and emotional escapade caused by the bankruptcy. The lawyer will provide the emotional distance necessary to correctly see the process through to the end, because mistakes are costly.
3. Complexity of the process. The Bankruptcy Act of 1978, the document upon which the process is based, is a book-length document. There are six different types of bankruptcy, and state law is not uniform. On top of that, the laws change annually. Keeping up with the changes is a full-time job, as is understanding the documentation already written with no previous training. A professional bankruptcy lawyer is makes the time and has the knowhow to do both.
4. Leverage. Lenders and their lawyers are well-versed in the law, having gone through the process countless times. An inexperienced person negotiating with such a creditor risks unfair treatment and bullying. A lawyer will be better able to negotiate fair settlements. Simply having a lawyer gives a case credibility that keeps creditors in check.
For some making a decision about counsel, the expense of a lawyer is weighed against the benefits. Many businesses and individuals have bounced back from the bankruptcy process, so it is possible to eventually resume a normal life when the process is handled correctly. For these reasons, hiring a lawyer seems to be the most reasonable and responsible choice.