The bankruptcy blog

When people get to a point where they decide they need to file bankruptcy because their debts have become too much for them to handle, those who are unfamiliar with the process and what it involves typically have a lot of questions. One the most important questions many people want to know about is what will happen to their car when they file bankruptcy. This article outlines all the different possibilities so you can decide which option is right for you.

Choose Between Chapter 7 and Chapter 13 to File Bankruptcy

If you don’t know much of anything about filing bankruptcy, you should work with a qualified bankruptcy attorney to help you with the process.  One of the many things a bankruptcy attorney will help you with is deciding which form of bankruptcy filing is right for you. The two most common options for individuals is a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.

A Chapter 7 bankruptcy is also referred to as a “straight” bankruptcy or “liquidation” bankruptcy. If you have significant non-exempt assets/property, those will have to be sold off or liquidated in order to pay down the debts being included in the bankruptcy. Property and assets typically considered exempt from this include your house (because you still need a place to live) and your car (because you still need to get around, commute to work, etc.). If you are still paying on a car loan for your vehicle, that debt may or may not be included in the bankruptcy (more on that later).

After liquidating non-exempt property/assets to pay creditors, any remaining qualifying debts will be wiped away entirely, giving you a kind of “clean slate.” There are, however, various debts that do not qualify to be included in a bankruptcy, such as students loans, alimony or child support payments you owe, and any recent federal/state/local taxes you haven’t paid. Chapter 7 bankruptcy is the best option for those whose income is limited enough that there’s basically no way they’d ever be able to repay their qualifying debts, which is why they get wiped away.

In a Chapter 13 bankruptcy, the idea is that your income is high enough that you just need some time in order to get caught up on your debts. The bankruptcy court acts as a go-between between you and your creditors to hit the “pause” button on your qualifying debts and set up a reasonable repayment plan. Over the course of 3-5 years, you’ll be able to get caught up on your debt payments. During that time, creditors are not allowed to start or continue any debt collection actions. The bankruptcy court consolidates the qualifying debts into a single monthly payment you pay to your bankruptcy trustee, who then distributes it among your creditors, meaning you don’t have to have any direct contact with them.

How Chapter 7 Bankruptcy Affects Your Car

If Chapter 7 ends up being the right choice for you to file bankruptcy, there are three basic options for what happens to your car if you’re still making payments on a loan for it, each of which is outlined below:

Surrender: If what you want to do is get rid of your car and the loan you’re still making payments on, you may be able to just surrender the car to the lender and include the car loan in your Chapter 7 bankruptcy filing. You may be able to literally walk away from the loan, even if you owe more on the loan than the car is worth. If the debt is included in the bankruptcy, then it will be wiped away. The downside to this option, of course, is that you then won’t have a car. So why would anyone ever choose this option? Because it’s a way of getting out from under the burden of a car you can longer afford. Surrender the car that’s too expensive for you when you file bankruptcy and then you have the option of getting a bankruptcy car loan for something you can afford.

Retain-and-pay: This is also common in a Chapter 7 bankruptcy. Your car loan is included in the bankruptcy, which means the lender can’t come after you, but you go ahead and keep making payments and hang on to the car. Yes, there will be a lien placed on the vehicle, but as long as you keep making your payments, you get to keep driving the car. Once you’ve paid off the loan, then you can get the lien removed so you’re free and clear. However, not all lenders will go for this type of arrangement. Some will demand what’s called a “reaffirmation agreement.”

Reaffirmation: Some banks and credit unions want you to “reaffirm” your car loan if you intend to keep driving your car during a Chapter 7 bankruptcy. It basically means you promise to keep making payments on your loan, and remain personally liable for the debt, which means your vehicle could get repossessed if you fail to make your payments.

Which of the above options is right for you? Talk it over with your bankruptcy attorney, who will help you decide which option you should go for, or which option you have to go for based on your situation and the lender who has your car loan.

How Chapter 13 Bankruptcy Affects Your Car

Remember that a Chapter 13 bankruptcy involves a repayment plan to help you get caught up on your debt payments. Below are the three basic options for what happens to your car and loan in a Chapter 13 bankruptcy:

Principal Reduction: This option is how you “cram down” your car loan. You can only do this if you took the loan out at least two-and-a-half years before filing bankruptcy. In this approach, the lender is willing to accept a reduction in the principle balance on the loan down to what the car is actually worth (fair market value). Instead of being “upside down” or “underwater” on the loan, where you owe more than the car is worth, after the cram down you’ll only owe what the car is worth. If you still owe $10,000 on the car but it’s only worth $7,000, the outstanding principal that you owe will be reduced or “crammed down” to $7,000.

Interest Rate Reduction: Another option is get the interest rate reduced on your loan. If part of your struggle to pay your car loan is because it has a high interest rate, this could be reduced by as much as 4-6%.

Arrears Catch-Up: If you’re several payments behind on your car and it hasn’t been repossessed yet, then you can take the total past due amount and stretch out repayment over the course of your Chapter 13 bankruptcy of 3-5 years. This can end up being a very small monthly payment that is easy to handle on top of the current monthly payment you have to continue making.

If you need to file bankruptcy as well as replace your car, Day One Credit is here to help. We’ve spent years developing a great network of lenders who specialize in serving bankruptcy customers. When you apply for a bankruptcy car loan through Day One Credit, we send your application out to all the lenders in our network because when they all compete against each other to get your business, you end up with the loan that fits your situation! Learn more by visiting our Why Day One page, find answers to common questions, feel free to contact us for anything else you want to know, or go ahead and apply now!

Looking at all the different debts you owe versus what you make in terms of income can be an eye-opening experience. Some people go through life not paying attention to the big picture of their debt and income until something happens that forces them to do it. When the reality of the picture sinks in, it can cause a wave of panic, often followed by despair at what might feel like a hopeless situation. This is when filing for bankruptcy might be your best option to reduce your debts and work towards a brighter financial future. This article describes 10 different signs to help you realize when it may be time to file bankruptcy.

1. Struggling to Pay the Basics

If you find yourself having to choose which basic bills you can afford to pay each month and which ones to put off until next time, you’re either not earning enough income to meet your basic needs or have to send off too much of your income to keep up with your debts, leaving less for the basics. This can be the result of losing a job or experiencing a sudden medical emergency not fully covered by your health insurance (if you have health insurance to begin with). If debt payments are getting in the way of meeting your basic needs and normal bills, it may well be time to file bankruptcy.

2. Minimum Payments (or less) on Credit Cards

Missing the occasional payment here and there on a credit card is not a big deal. But if you find yourself in a situation with multiple credit cards and high balances where all you can ever do is pay the “minimum due” amount (and sometimes not even that much), you should definitely look at the rest your finances and see if it all is trying to tell you it may be time to file bankruptcy. Another variation on this problem is when you take a cash advance out on one card to make the payment on another, or if you’re constantly transferring balances to new cards. These are just delaying tactics that won’t solve your credit card debt problems in the longer term. In fact, it typically worsens the problem by allowing the debt to grow over time.

3. Collection Agencies are Constantly Calling

If you’re late on a loan payment, the company holding the loan will probably do an auto-call to remind you to make a payment. If the debt has been turned over to a collection agency because you’ve missed several payments, you can expect the calls to ratchet up in terms of frequency. Ignoring the calls is not a long-term strategy to free you from the mounting pressures of the debts you owe, which means it might be time to file bankruptcy.

4. Using Credit Cards or Personal Loans to Pay for Necessities

Some people purposefully use credit cards to pay for necessities because they earn rewards for their spending, such as frequent flyer miles and so on. That’s fine if they’re paying off their balance from month to month. But if you’re using credit cards to pay the basics because you don’t have enough money coming in, you run the risk of running up more credit card debt than you’ll be able to handle. This can be a reason to look at whether or not it’s time to file bankruptcy.

5. Debt Consolidation Looks Good

You’ve seen the offers to consolidate your debt with a company that also promises to lower your overall monthly debt payment. This sounds great from a cash-flow perspective because you’ll have more money each month to spend. It is rarely, however, a good idea in the bigger picture of your financial future. The consolidation gives you a lower monthly debt payment by spreading the payments out over a much longer period of time, which also masks the interest you’ll pay over those years. This can mean you’ll end up paying significantly more than your original debts in the long term. You might be better off exploring whether it’s time to file bankruptcy.

6. Lawsuits from One or More Debt Collectors

If you receive a court summons because you’ve ignored the attempts of debt collectors to get you to pay up, it’s important to understand that you could end up being responsible for all the court costs and other legal fees involved in the lawsuit. Filing bankruptcy will stop the lawsuit in its tracks and help protect you from other actions of debt collectors.

7. Wage Garnishing

After a lawsuit has been decided in favor of the debt collector, they have legal recourse to do things to get their money, although this varies by state. In some cases they can freeze your bank account. In other cases they can garnish your wages, which means your employer will be required to hold back a certain amount of your paycheck until the debt is paid off. Proactively filing for bankruptcy can prevent these sorts of things from happening. And make no mistake, wage garnishment is not as uncommon as you might think. Some estimates say as many as one in ten Americans have their wages garnished to pay off debts.

8. Foreclosure on Your Home

If you’ve fallen behind on your mortgage payments and foreclosure is looming on the horizon, bankruptcy can be a way to figure it all out and keep your home, either by eliminating many of your debts in a Chapter 7 bankruptcy, or sticking to a reasonable repayment plan over 3-5 years in a Chapter 13 bankruptcy.

9. You’re Tired of Living Paycheck-to-Paycheck

If every month is a major struggle because of your debt, it’s worth taking time to figure out what’s really going on. If the debts you owe total up to more than half your annual income, it’s unlikely you’ll be able to get your debt under control in the foreseeable future. Missing multiple payments can result in vehicle repossession, student loan default, collection agencies and lawsuits, all of which will keep your credit score going down instead of up. Filing bankruptcy can help you turn that situation around (note that student loan debt is almost never covered by bankruptcy, so you’ll still have to make good on that).

10. Your Income Isn’t Going to Go Up and You’ve Spent Your Savings

Sometimes people who are struggling to keep up with their debts think they can hold out for more income, whether it’s getting a better-paying job or taking on an additional job (or two). But you need to be realistic about this. If the reality is that your income is not going to be going up any time soon, or only by a little bit, then your overall situation isn’t really going to change, which might mean a better approach is seeing it’s time to file bankruptcy. If you look ahead and come up with a real plan to pay off your debts but it’s going to take longer than five years to do it, bankruptcy might be a better option. What often goes along with this is running through all your savings to maintain debt payments and living expenses. If all the savings are gone and you still have more debt than you can manage, it may be time to file bankruptcy. If you haven’t already started spending your savings, then don’t! Protect your long-term financial health and that of your family by exploring bankruptcy as an option.

When one or more of the signs listed above apply to you, then it may be time to file bankruptcy. You’ll need the help of a qualified bankruptcy attorney to ensure it’s the right option for you and to make it happen. Day One Credit is pleased to recommend any of the lawyers listed on our Bankruptcy Attorney Page.  Alternatively, also check out our post on how to choose a good bankruptcy lawyer.

If you are considering filing bankruptcy or have recently filed and realize you need to replace your car, Day One Credit specializes in finding bankruptcy car loans to help you get the vehicle you need without your bankruptcy getting in the way. Our goal is simple: Helping each customer going through bankruptcy find the car and loan they need while also helping them rebuild their credit. Feel free to contact us to speak with one of our friendly customer service representatives to learn more about how we can help. You can also get started right away when you apply online with our easy online application, which will give you an answer in a matter of minutes thanks to our network of lenders who all compete for your business. This is how we find the loan option that fits your situation!

Some people are reluctant to file for bankruptcy even when they know they should because they think everyone is going to know about it. They’ve also heard that people get a lot of mailings after filing for bankruptcy with all kind of offers from debt relief programs to credit card offers to various kinds of loans they can get in spite of their bankruptcy. This article will explain why you receive so many mailings after filing bankruptcy and also explain who is likely to know about your filing and why.

Filing Bankruptcy is a Matter of Public Record

The first thing you should know is that because filing bankruptcy is a federal court proceeding, the information about your case is matter of public record and in the public domain. But just because that’s true doesn’t mean everyone will know about your case. The information about your bankruptcy filing is entered into a system called PACER (Public Access to Court Electronic Records), which is an electronic database of case and docket information from the United States district courts, United States courts of appeals, and United States bankruptcy courts. However, using PACER requires the user to register, get a password, and also pay 8 cents for each document viewed. In other words, your friends and neighbors are not using PACER to find out who in their community has filed for bankruptcy. Very few regular people will know about your case.

That said, there are still a few smaller towns where local bankruptcy filings are published in the newspaper or online, but these are really few and far between. If you’re concerned about this, ask a local bankruptcy attorney and they should be able to tell you whether or not this happens in your area. In any larger city, it won’t happen because it would be way too much to publish on a regular basis.

What About All Those Mailings You Get After Filing Bankruptcy?

There are people and companies for whom it makes sense to have PACER accounts and shell out the money for large amounts of records. And this is the source of all those mailings you get after filing bankruptcy. There are companies who will pay the money to access bankruptcy records in their area because they offer services of some kind tailored to bankruptcy filers. These can include debt relief or debt consolidation programs (some of which are either not a good idea or are outright scams) while others are offers of credit or loans you can get in spite of your bankruptcy. It’s easy to dismiss all of this as junk mail and just toss it in the recycling bin, but you should take a closer look at them because there could be some good offers in there. After all, one of the things you should be thinking about during and after your bankruptcy is rebuilding your credit, and getting a new line of credit and making on-time payments is one way to do that.

For example, Day One Credit uses PACER for access to mailing addresses of people who have filed for bankruptcy. Few things can feel as stressful as filing bankruptcy and then discovering you need to replace your car, and fast. Unfortunately, many people think their bankruptcy prevents them from getting the car loan they need. Not true! But to let people know they can find a bankruptcy car loan to buy the car they need, Day One is willing to pay a small amount to reach potential customers in need. This is a good reason to take a closer look at some of those mailings before you recycle them. The right offer could be waiting for you to help you rebuild your credit.

What About Credit Card Offers?

Some of those mailings will be for credit card offers, which some people find confusing. This is especially true when their bankruptcy includes a credit card overdue balance with a company that is also sending them a post-bankruptcy credit card offer. What gives? This is just a case of the left hand not knowing what the right hand is doing. Your overdue credit card balance in your bankruptcy has probably been sitting in the collections department of the card company for some time. Meanwhile, a whole other department is responsible for getting credit card offers out to as many people as possible.

With these credit card offers, you’re not necessarily being targeted because of your bankruptcy, but you might be. Those credit card mailings go out to a lot of people and they cast a very wide net, so chances are they don’t even know you filed. And it will be a whole different set of people who evaluate your creditworthiness if you apply, so there’s no guarantee you’re going to be accepted. Offers to just apply usually mean they haven’t even peeked at your credit report, whereas offers that mention preapproval tend to indicate they’ve looked at something that makes them think you’ll probably be accepted. But if they do take a closer look and see a bankruptcy or a low credit score, they might still approve you, but at a much higher interest rate than the original offer (if there was one).

One way to restore your credit without as much risk as an unsecured card that might be hard to get is to opt instead for a secured credit card. You save up however much money you want for a credit limit and deposit it with the company who issues you the secured credit card. If you fail to make a payment on your balance, the company already has the cash on hand to cover it. But if you want this to help rebuild your credit, you’ll pay off the balance each and every month on time.

Rebuild Your Credit with a Bankruptcy Car Loan

There’s a kind of catch 22 concerning credit scores and debt and bankruptcy. You declare bankruptcy because your debts have gotten out of hand for whatever reason and you need to make a fresh start. Your credit may be seriously damaged through this process, so you want to improve your credit score to make sure your options are open for future needs like applying for a mortgage or getting a car loan. But the only way to improve your credit score is by having credit that you use responsibly. After getting rid of a bunch of debt, it feels like the last thing you want to do is take on any new debt, but that’s one of the few ways you can actively rebuild your credit!

One way to do this is by working with Day One to find a bankruptcy car loan. We encourage our customers to purchase high-quality newer used cars with low mileage in order to get the most bang for the buck. When you use our fast online application we send it out to multiple lenders in our network who specialize in helping bankruptcy filers get the car loan they need. We get their offers and then select the best one to present to you – all within a matter of minutes! We’ve been doing this for years and have a long history of getting great results that our customers love, along with customer service that treats you like a VIP. Got questions? Contact us to get answers!

There are a lot of misconceptions out there about bankruptcy. We hope that after reading this article you have a better understanding about bankruptcy and what is and what it is not. Let’s set the record straight with 12 bankruptcy myths busted.

Myth #1: Bankruptcy is an Ending

Society has attached a great deal of stigma to bankruptcy. This has made everyone think of it as only the absolute last resort when all else is lost. This stigma makes bankruptcy feel like some kind of awful ending after you’ve struggled for years to stay afloat even though a mountain of debt has been slowly dragging you down. This is NOT the way to think about bankruptcy! You’ll be in a much better place psychologically if you think of bankruptcy not as an ending, but as a beginning. It is the beginning of you taking back control of your finances. It is the beginning of restoring and rebuilding your credit. It is the beginning of your journey towards a much brighter financial future. The way you think about things matters a lot. Think about bankruptcy as a beginning and that will put you in the right frame of mind to make the most of your second chance.

Myth #2: Bankruptcy is a Failure

Are there people who end up filing for bankruptcy because they indulged poor spending habits over too much time? Yes, of course there are. But it’s simply wrong to think that everyone who declares bankruptcy must be irresponsible. All it takes is a major medical crisis or series of medical emergencies to find yourself unable to keep up with payments. Health insurance is great, but rarely pays for everything when it comes to a major illness or chronic condition or accident, saddling you with unmanageable debts. As a matter of fact, medical expenses are the number one cause of bankruptcy, followed by job loss, excessive credit card use, and divorce/separation. Sometimes life throws you such a curve that bankruptcy is actually the most responsible thing you can do for your financial future!

Myth #3: Bankruptcy Ruins Your Credit Forever

The effect of bankruptcy on your credit score actually varies widely depending on the details of your particular situation. If your credit score was already tanking, filing for bankruptcy might actually cause it to improve when the discharge of included debts is complete. After all, if you have roughly the same income as before, then your debt-to-income ratio will be much better than before. In other cases, bankruptcy does lower your credit score further. And yes, the bankruptcy stays on your credit card for 7-10 years for all potential lenders to see when they pull your credit report, but it will be only one factor of many that they look at. There’s a wide misconception that bankruptcy automatically prevents you from getting new credit or taking out new loans. Not necessarily! In fact, there are plenty of lenders out there who specialize in helping bankruptcy customers get the credit they need. Of course, you will likely have to settle for significantly higher interest rates than people with excellent credit and no bankruptcies, but the situation is not nearly as bad as many people seem to think.

Myth #4: You Lose Everything in a Bankruptcy

Some people think that when you declare bankruptcy they’re going to take everything you own. This is because a Chapter 7 bankruptcy is also called a “liquidation” bankruptcy. Yes, the bankruptcy attorney can take your property and sell it off to pay some of your creditors at least some of what you owe them. In many cases, people filing for bankruptcy don’t have a lot of property that would be even be eligible for liquidation because it is exempt. Exemptions vary from state to state, so you’ll want to check your state’s bankruptcy laws. For the most part, you will not have to worry about keeping your home, your car, your retirement fund, or your personal possessions (household goods). The better way to think about bankruptcy is that it is a way for you to protect most of your property.

Myth #5: You Can’t Get a Car Loan in Bankruptcy

Many people think you’re automatically disqualified from getting a car loan when you have an open bankruptcy. Many also think that even after your bankruptcy has been discharged that car lenders won’t even consider lending to you for at least a couple years. While both of these scenarios may be the case with some lenders, there are lenders who have specific programs designed especially for bankruptcy customers. As previously mentioned, you’re probably going to pay a higher interest rate, but you may be able to get a loan. This is good news for people who declare bankruptcy and then suddenly discover they need to replace their car. So you may be able to not only get a car loan while in bankruptcy, but you may also enjoy the potential benefits of getting a bankruptcy car loan! To name a few: restore your credit, get out of a bad car loan, drive a better car and more.

Myth #6: Filing Bankruptcy is Expensive

The actual cost that the bankruptcy court charges you to file is not a lot of money. In the Southern District of California, the fees are $335 for a Chapter 7 and $310 for a Chapter 13. However, this does not include the cost of having a bankruptcy lawyer you help you – which is definitely recommended as it can be a complicated process to understand and is not something you should try to do on your own. Attorney fees do vary from market to market, but in the Southern District of California, the fees typically fall within a defined range. The range of what attorneys charge for a Chapter 7 bankruptcy can be from $1,000 to $1,600, with the average being $1,560. A Chapter 13 bankruptcy is more complicated, so the range can be from $3,300 to $5,000. These figures may sound like a lot, but when you consider that you’re going to get rid of many more thousands of dollars of debts, it’s really a small price to pay to regain control of your financial life.

Myth #7: It’s Hard to Find a Good Bankruptcy Attorney

For the most part, bankruptcy attorneys are no less and no more scrupulous than most attorneys. There are what’s known as “bankruptcy mills” who are all about handling as high a volume of cases as possible. In these firms, paralegals are doing most of the work and you might not even see the actual attorney handling your case until it’s well underway and time for the meeting with creditors. This type of bankruptcy law firm is not scamming you, but they probably aren’t going to give you the kind of personal attention you deserve when going through a stressful process. Anyplace that treats you more like a case number than a person is one to avoid. Go with a small firm or solo bankruptcy attorney who is willing to sit down with you, talk you through the process, answer your questions, and wants to understand your particular needs and situation. Day One knows some experienced bankruptcy lawyers and recommends working with any of the individuals or firms listed on our recommended bankruptcy attorney page. Please read our article on how to choose a bankruptcy attorney to fit your needs.

Myth #8: Bankruptcy Eliminates All Your Debts

This is a myth many people believe, but the answer is definitely NO – bankruptcy will not make ALL your debts go away. There a number of types of debt that are automatically disqualified from being included in bankruptcy, including back alimony and/or child support, student loans (except in rare cases), some back taxes, and any fines you owe from violating laws. These are among the debts that will not be included in your bankruptcy. There are also some debts you won’t want to include because you want to keep the property linked to them, like your mortgage and your car loan. In some cases you’ll want to sign a “reaffirmation” agreement with those lenders so they know you’re committed to keeping up your payments on those debts because you need a place to live and a car to drive!

Myth #9: Bankruptcy Ruins Your Spouse’s Credit

If you’re married, both spouses do not have to file bankruptcy. If one spouse has run up $60,000 in credit card debt only in their own name, that spouse can declare bankruptcy individually with no repercussions on the other spouse. In other cases, both spouses will want to file a joint bankruptcy together. Either way is fine depending on your circumstances, but being married doesn’t mean you both have to file, or that one spouse filing ruins the other spouse’s credit.

Myth #10: Bankruptcy is a One-Time Option

Filing for bankruptcy once doesn’t mean you’re forever barred from doing it again. But there are some limits in order to keep people from becoming serial bankrupters who are just taking advantage of the system to live extravagant lifestyles by accumulating debt and then declaring bankruptcy. If you file for Chapter 7 bankruptcy, you will have to wait a full eight years before you can do it again. If you file a Chapter 13, you have to wait at least two years to do another one. If your previous bankruptcy was a Chapter 7 and you decide to go with a Chapter 13, you can do that in just four years after a Chapter 7. These laws were changed back in 2005 to encourage wealthier people to move towards Chapter 13 because more debts get paid back in a Chapter 13 bankruptcy. A Chapter 7 followed by a Chapter 13 is sometimes called a Chapter 20. If your previous case was a Chapter 13 and you want to go for a Chapter 7, you’ll have to wait six years after your Chapter 13.

Myth #11: Everyone Will Know You Filed for Bankruptcy

Yes, there was a time when it was fairly common for local newspapers to mention names of people who filed for bankruptcy. There are few newspapers who still do it (very few, luckily). It seems like filing for bankruptcy should be your private business, right? Unfortunately, because it’s a federal court proceeding, it is a matter of public record. This is why you might notice you suddenly start getting lot of mailings for debt relief programs or credit card offers or offers for other kinds of loans. There is a whole industry that has developed around serving bankruptcy customers, some of it good and some of it bad, and they can get access to your mailing address through public domain records.

Myth #12: Filing Bankruptcy Could Get You Fired

Thank goodness this one is totally a myth! Now, there may have been a time when some employers were worried that someone who declared bankruptcy would be in such dire financial straits that they might steal from the company. To prevent that from happening, there is in fact a law about it. Federal law (11 U.S.C. Sec. 525) prohibits any employer from discriminating against you because you filed bankruptcy. In reality, this isn’t something that’s going to happen. There are very few cases where that law has to be invoked – but it’s there if you need it!

Now that you know the common misconceptions about bankruptcy, you may be closer to deciding if filing for bankruptcy is the right choice for you. We recommend seeking help from a professional bankruptcy attorney to determine if you should file or what type of bankruptcy is right for you.

Close to a million non-business consumers seeking debt relief file for bankruptcy each year. Once you’ve decided that filing bankruptcy might be the only way for you to get your debt load back under control, the best way to make sure you choose the right type of bankruptcy and make a successful filing is to work with a qualified consumer bankruptcy lawyer. But how do you go about choosing a bankruptcy lawyer? This article will give you our opinion on how to make an informed decision. And if you’re asking yourself, “How do I find bankruptcy lawyers near me?” we’ll provide a great answer to that question at the end of this article.

A Solo Bankruptcy Lawyer, Small Firm or Bankruptcy Mill?

There are different approaches in the legal industry to bankruptcy cases. Some firms have figured out how to use non-lawyer paraprofessionals to handle the bulk of the work, including basic information intake, explaining the process, and making sure you gather all the required documentation about your debts and finances. With this “mill” approach that’s all about handling a high volume of cases, you might not even see a real lawyer until you have the meeting with creditors around a month into the whole process. People who end up going with a bankruptcy mill often feel like they were just another case and that their personal needs weren’t really considered. It’s also important to understand that there isn’t usually any financial advantage to going with a mill. Bankruptcy lawyer fees tend to fall within a fairly tight range in any given market. We recommend you go with a small firm or solo bankruptcy lawyer where you’re more likely to get the individual care and attention you deserve.

Focus on Your Local Geographic Area

The last thing you need is adding a long commute to your already-stressful situation. If you’re in the greater San Diego area of California, there are many qualified bankruptcy attorneys ready and willing to serve your needs. There is no need to travel long distances to find a great bankruptcy lawyer, so narrow your search down to those who are within an easy, comfortable distance from your home or work.

Bankruptcy Lawyer Reviews and Testimonials

As you visit the websites of various bankruptcy lawyers, avoid making the mistake of only relying on the customer testimonials provided on the site. Every attorney or firm wants to put their best foot forward on their own website, so you can assume that you’ll only find positive, glowing testimonials there. What you want to see are the customer reviews that are written and posted on sites like Google, Yelp and so on. You also get the advantage of seeing how many reviews have been posted and an overall rating based on all those reviews. This is a great way to further narrow your search.

The Costs of a Bankruptcy Lawyer

You want to be prepared for the costs of filing bankruptcy. The court-required fees to file in California are $335 for a Chapter 7 and $310 for a Chapter 13 (these fees do go up over time, last updated in California in 2016). Your bankruptcy lawyer fees are an additional cost you pay for the help provided in taking you through the whole process. Most bankruptcy attorneys will handle Chapter 7 bankruptcies for a flat fee that can range from $1,000 to $1,600 or more, depending on the complexity of your situation. In California the average is around $1,560 (the national average is $1,450). Attorney fees for a Chapter 13 are higher than a Chapter 7 because a Chapter 13 bankruptcy is more complicated due to its required repayment plan. When there is no business involved in a Chapter 13, the southern district of California that includes San Diego assumes fees in the range of $3,300 to $5,000 are normal and acceptable. If you’re in a low-income situation where you make less than 125% of the federal poverty level, you might qualify for free legal assistance to file bankruptcy. Options for this in San Diego County include the Legal Aid Society of California and the San Diego Volunteer Lawyer Program.

Success Rates for Chapter 13 Filers

If a bankruptcy lawyer suggests that a Chapter 13 sounds like a good option for you, ask about their success rate on Chapter 13 filings. Nationwide, a lot of Chapter 13 cases fail. In fact, on average only 33% are successful. In part this is because people who try to file Chapter 13 without the help of a bankruptcy lawyer almost always fail, so working with a good attorney will increase your likelihood of success to more than 50%. But also keep in mind that these low success rates aren’t necessarily the fault of the bankruptcy lawyer. A Chapter 13 bankruptcy lasts 3-5 years – plenty of time for life to throw you a curve ball that throws you off your intended repayment plan. When that happens, your case may be dismissed or converted into a Chapter 7 case. But what you can say is this – bankruptcy lawyers with Chapter 13 success rates higher than the national averages are doing something right!

Personality, Customer Service, and Language Skills

You want to be comfortable with the bankruptcy lawyer you choose, so pay attention to their personality and customer service skills as you interact with them. You want someone who clearly cares enough to learn the particulars of your situation, your needs and wants to get you the best outcome possible. Also, if English is not your first language, then you’ll want to look for bankruptcy attorneys and firms that offer bilingual services so you can communicate in the language that works best for you. In the San Diego, there are plenty of options available to find Spanish-speaking bankruptcy legal assistance.

Bankruptcy Attorneys Recommended by Day One

One quick way to come up with a short-list of experienced bankruptcy lawyers in your area is to visit our recommended bankruptcy attorneys page. We’ve been helping bankruptcy filers find the used car loans they need for years. This has allowed us to get to know a number of bankruptcy attorneys, and we are proud to recommend any one of them to you. Your search for an experienced bankruptcy lawyer just got a whole lot easier! And if you find you need to replace your car after filing bankruptcy, we work with a network of excellent lenders who will compete for your business.