Do I Need a Lawyer to File for Bankruptcy?

Take our short quiz to determine whether your bankruptcy case is simple enough to file without a lawyer. You’ll also get 50% off a Nolo bankruptcy book.

No rule says you must hire a bankruptcy lawyer, but making a mistake could be costly. Before getting started, make sure to consider the following issues.

Why Are You Filing for Bankruptcy?

Chapter 7 does a great job of wiping out qualifying debts like credit card balances, medical and utility bills, unpaid rent and lease payments, personal loans, and more. But some types of problems require quick action, legal knowledge, and experience. Consider talking to a lawyer as soon as possible if:

  • your home is in foreclosure
  • you're facing wage garnishment
  • your landlord is evicting you, or
  • you're involved in a lawsuit.

Not only do these problems involve tight filing deadlines, but some issues can only be solved in Chapter 13—a chapter that's too complicated for most people to file without a lawyer. For instance, only Chapter 13 can save your home from foreclosure.

Should You Wait to File for Bankruptcy?

You don't need a certain amount of debt to file for Chapter 7. But filing for bankruptcy will negatively affect your credit score for up to ten years, and you're only entitled to a Chapter 7 discharge once every eight years.

Because many people can repay $10,000 or less using other means, you'll want to tally up the amount you'd be able to erase in bankruptcy and make sure it will be enough to make filing for bankruptcy worthwhile. Here are some of the debts you'd be able to discharge:

  • credit card balances
  • car loans (if you plan on letting go of the car)
  • medical bills
  • past-due rent
  • utility bills
  • payday and other personal loans, and
  • money owed on leases and contracts, like gym memberships.

Don't include student loans, your current mortgage, tax debt, or support payments and arrearages (past due taxes and support)—we'll discuss those later. Finally, ask yourself whether you could pay your debt off another way or if you think you might incur more debt in the future. If you answer yes to either part, filing might not be for you.

Do You Have Debts You Can't Erase in Bankruptcy?

Some debts, called “nondischargeable debts,” can't be wiped out in bankruptcy—and nondischargeable debt rules get confusing quickly.

Here are some examples.

  • You can't erase spousal or child support arrearages in bankruptcy—you'd remain responsible for them after the case.
  • You can discharge tax debt older than three years if it meets other qualification requirements.
  • DUI and fraud-related debts aren't dischargeable if a creditor objects.
  • Marital property settlement obligations and tax debt paid with a credit card aren't dischargeable in Chapter 7 but are in Chapter 13.
  • Student loans are also nondischargeable, but if it would be unlikely you could ever pay them back because of undue hardship, it is possible to wipe out student loans in bankruptcy. However, you'd have to prove it by filing a type of lawsuit called an adversary proceeding, a complicated endeavor without legal help.

If you have any of these obligations, you'll want to talk with a lawyer.

Would You Lose Property in Chapter 7 Bankruptcy?

Chapter 7 is a “liquidation” bankruptcy, so one of the most significant filing risks involves losing property. The bankruptcy trustee will sell anything you can't protect with a bankruptcy exemption.

Exemptions vary depending on where you live because your state decides what you can protect. But you'll likely be able to keep things needed to work and live—like a modest home and car, furnishings, a television, tools needed in your profession, and an ERISA-qualified retirement account—but not much else.

Bankruptcy law doesn't protect luxury items, like expensive jewelry, designer clothing, collections, and valuable artwork. Household items worth more than the typical garage sale price won't be exempt either. Rental property, stock, stock options, whole life insurance, and cash or money in a bank account are also challenging to protect.

Finally, if you own a home or car that you'd like to keep, talk to a lawyer. Not only will you need to protect all of your equity with a bankruptcy exemption, but if you're behind on finance payments when you file, you'll lose the property in Chapter 7. Filing for Chapter 13 might be the better option.

Do You Have an Unusual or Tricky Ownership Interest?

Sometimes people own property they aren't aware of—and if you don't know how to exempt it, you could lose it. If one of the following situations applies, you probably won't want to file without consulting a lawyer first:

  • you have a claim or lawsuit against someone
  • you haven't received your tax refund yet
  • you might receive an inheritance soon, or
  • you're an independent contractor or have an ownership interest in a business.

People with interests in a business should learn about small businesses in bankruptcy.

Do You Qualify for Chapter 7 Bankruptcy?

Not everyone is entitled to a Chapter 7 discharge. You'll have to prove that either:

  • your household gross income is below a certain amount, or
  • you don't have enough money to make reasonable creditor payments through a Chapter 13 repayment plan.

You can find out whether you qualify by taking and passing the Chapter 7 means test.

Are You Married?

Married people can file Chapter 7 together, but it's more complicated, even if only one spouse files. For instance, did you realize that a married person filing alone must disclose the nonfiling spouse's income, but if they're living apart, they can claim expenses for two households? That's just the tip of the iceberg. It's a good idea to let a lawyer help you work through the details.

Consulting With a Lawyer

If you don't have any of the problems we've listed above, it's likely that your case is simple enough to file without a lawyer. But other issues can exist, so it's a good idea to get legal advice before deciding whether to take the DIY approach. Plus, many bankruptcy lawyers provide the initial consultation free of charge.

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