Clients often ask me why they should pay for an attorney if all of the bankruptcy forms are available online for free. The most important reason, especially in Chapter 7, is that a good bankruptcy attorney will fight for you and help you protect your assets.
The rules about which assets are protected in a bankruptcy are extremely detailed, difficult to understand, and can make thousands of dollars of difference in your post-bankruptcy net worth.
Our firm achieved a recent victory that demonstrates the value that a good bankruptcy attorney can add to your case. I filed a case for a client whose husband had passed away earlier in the year. Following her husband’s death, the client inherited her deceased husband’s IRA, which was worth about $20,000 when we filed her case.
A Chapter 7 Trustee can challenge your exemption claims.
When the Chapter 7 Trustee found out that the IRA was inherited from her deceased husband, the Trustee filed a motion attacking the exemption and arguing that an IRA inherited from another person does not qualify as a retirement account. If the Trustee was right, our client would have had to give up her $20,000 IRA, which the Trustee would have used to pay off debt.
My firm presented the case to the judge, arguing that under some circumstances, an inherited IRA can qualify as a retirement account. Ultimately the judge ruled for our client and agreed that the inherited IRA in this case was a retirement account that qualified for the exemption for the full amount.
If our client had filed a case on her own, or even with an attorney who did not specialize in bankruptcy, she would likely have lost thousands of dollars worth of retirement funds. Because she chose to invest in a bankruptcy specialist, she is now debt-free and has a head start on her retirement savings.
Understanding how exemptions are applied can get confusing for people who are not lawyers.
Another example of a tricky exemption issue that could cost an unwary filer is the exemption used to protect real estate like land or houses. The “homestead exemption” allows you to protect $21,500 in equity for a single filer, or $43,000 in equity for a joint case, in a house that you live in. However, the homestead exemption can only be used for your residence, so if you have land that you do not live on, or if you have a house that is not your residence, you could end up losing your property because you were not entitled to the exemption you thought you were.
Exemptions are just one of many reasons that it is worthwhile to hire an experienced attorney to file your bankruptcy. The cost of hiring an attorney is small compared with the potential costs of a bad bankruptcy.
It is absolutely free to talk to an attorney at our office and learn how to get rid of your debt and protect your assets.