Home Finance Personal Bankruptcy: A Lawyer Creates Additional Costs

Personal Bankruptcy: A Lawyer Creates Additional Costs

Personal Bankruptcy
Personal Bankruptcy

If a debtor cannot reach an out-of-court agreement with his creditors, the only option is usually to personal bankruptcy. Judicial insolvency proceedings are used to free the debtor from his debts in the long term by fully or partially satisfying the creditors’ claims over a longer period of time. In the latter case, freedom from debt can only be achieved by discharging the remaining debt.

In order not to go from filing for bankruptcy to being exempt from debt alone, debtors can seek professional advice and can help you with portfolio recovery lawsuit. In order to avoid the development of new debts, many of those affected opt for free advice from a public body. If you want intensive and individual insolvency advice, you can also turn to a lawyer. However, there are costs for this.

Is a lawyer required during bankruptcy proceedings?

No, insolvency proceedings can both be registered and run through without the assistance of a lawyer. If you want to avoid legal fees, you can turn to a public debt counseling service for advice.

The remuneration of the lawyer in insolvency proceedings is based on the Lawyers’ Remuneration Act. The amount depends on the scope, the degree of difficulty of the activity and the value of the subject.

Can the costs for the lawyer in personal bankruptcy be covered?

If you are dependent on legal advice or out-of-court representation from an insolvency lawyer, you can apply for a counseling aid certificate from the local court. The consultation costs will be covered upon approval.

If you want to seek advice from a lawyer in the event of insolvency and possibly imminent bankruptcy, you should note that private debt counseling usually incurs costs. The lawyer only has an advisory and supportive function before and during the personal bankruptcy, since a legal counsel is not required in bankruptcy proceedings and the bankruptcy court is responsible for the debtor.

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A lawyer can do the following before and during bankruptcy:

  • Before the insolvency proceedings: communication with the creditors as part of the out-of-court settlement attempt
  • When filing for bankruptcy: compiling the documents, filling out the bankruptcy application, issuing a certificate of failure of the judicial settlement attempt, drawing up a debt settlement plan for a judicial settlement attempt
  • After bankruptcy has opened: management and control of correspondence, advice on organization and planning in bankruptcy and legal issues

The lawyer receives a fee for fulfilling his duties, the amount of which is based on the Lawyers’ Remuneration Act. A lump sum cannot be given at this point, as this varies from case to case. The amount of the costs incurred by a lawyer in the event of a personal bankruptcy also depends on the following factors:

  • Scope of legal activity
  • Difficulty level of the activity
  • Item value

Clarify in advance with your lawyer what costs will be incurred in the course of the consultation and agree on the method of payment.

It is possible to apply for a counseling aid certificate at the local district court for legal debt advice if you cannot pay the costs for the lawyer yourself. If you need legal advice or out-of-court representation and you only have a low income, the costs can be covered if necessary. The application can be submitted by post or in person. The following documents must be attached to this:

  • Identity card
  • Proof of income (proof of salary or wages, ALG II notification)
  • Bank statements (for the last three months)
  • Proof of tenancy
  • Proof of ongoing payment obligations
  • Debt records

Is personal bankruptcy possible without a lawyer?

Being over-indebted is an extremely stressful situation for those affected. New reminders flutter into the house, the total debt increases due to interest and dunning fees and creditors threaten with foreclosure measures. For many debtors, private bankruptcy proceedings are the last resort out of the debt trap.

The bankruptcy usually lasts a little more than six years. The procedure is indeed full of privation, but in the end there is release from the remaining debts. Since these are proceedings before a court, many of those affected are wondering whether they absolutely need a lawyer to register and carry out personal bankruptcy.

Personal bankruptcy without a lawyer has both advantages and disadvantages

To answer the question asked in the headline in advance: Yes, debtors can register and go through a personal bankruptcy without a lawyer. Neither the bankruptcy code nor any other law stipulate that a lawyer is required. You can therefore apply for bankruptcy on your own and do not need legal assistance during the ongoing insolvency proceedings.

One of the benefits of entering bankruptcy proceedings without the assistance of a lawyer is that: A lawyer must be paid for his services. The bankruptcy itself brings with it certain costs – the remuneration of the insolvency administrator and the court costs. These must be borne by the debtor. If a lawyer is hired, these costs increase even further. Going through personal bankruptcy without a lawyer is a cheaper alternative.

However, in some cases it is not advisable to go without the assistance of a lawyer. Even the application process, where many forms have to be filled out correctly, can overwhelm those affected. If mistakes are made and assets are concealed, this can lead to a refusal to discharge the remaining debt. A lawyer for insolvency law is well versed in this area of ​​expertise and can support you in all procedural steps. He can also negotiate with a creditor and, if necessary, represent you and handle your correspondence.

Alternative: help through debt counseling

Would you like to go through personal bankruptcy without a lawyer, but still not forego support and advice? In this case, you can get help from a debt counseling service. These types of non-profit and government agencies usually operate free of charge, while other providers charge a fee for their work.

Debt counseling centers that work free of charge are of course particularly popular. For this reason, debtors have to be prepared for sometimes long waiting times before they get an appointment. With a lawyer, this is usually much faster.

Furthermore, it should be noted that the debt counseling service, as the name suggests, only acts in an advisory capacity. Employees can answer questions and give tips. They are more likely to provide help for self-help. However, the debtor must go through important steps himself. So this means that personal bankruptcy without a lawyer means more work for the person concerned.

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