Debt Counseling from A Lawyer – Is It Recommended?

The most important thing about the lawyer for debt counseling

Do lawyers also offer debt counseling?

Yes, a lawyer can also advise debtors and also support them with personal bankruptcy.

What are the advantages of legal debt advice?

In contrast to public debt advice centers, you usually do not have to expect long waiting times at the lawyer.

What does it cost if I go to a lawyer for debt counseling?

Most lawyers charge a flat rate for their debt counseling, which is often less than the legal fees. It is best to have a lawyer explain the costs involved to you before commissioning.

How can a debt counseling attorney help you?

If people have accumulated debts, this often leads to a rat tail of consequences.Installment payments can no longer be made, debt collection companies write letters, dunning notices or enforcement notices are received or there is a threat of a salary or wage seizure.If people do not manage to get out of debt on their own, debt counseling from a lawyer can help them. A lawyer will first get an overview of the debt and then develop a debt reduction plan.

Usually the debt counseling attorney will try to reach an out-of-court settlement with the creditors. If that is not possible, personal bankruptcy is often the only solution.

Impending personal bankruptcy: Rely on a lawyer or debt counseling?

If it is foreseeable that the person concerned can only become debt-free through personal bankruptcy, the question often arises as to who is the better contact person for support: is a lawyer or debt counseling the better choice?

It is not possible to give a general answer here, as both bodies have their advantages and disadvantages and the preferences of the debtor also play a major role. The great advantage of debt counseling by a lawyer lies in the mostly short waiting times. A personal bankruptcy can therefore be tackled earlier. However, as we will explain in more detail later, this incurs costs.

In the case of state and non-profit debt counseling centers, however, it is the other way round: Here long waiting times are sometimes to be expected, but the advice is free of charge. Another important difference is the scope of services: Conventional counseling sees itself more as helping people to help themselves. The debtor receives important tips and advice, but has to take action himself.

However, if a lawyer advises the debtor, he relieves the debtor of certain tasks. This includes, among other things, negotiating with creditors and filing for bankruptcy. A bankruptcy attorney is also an expert in the field.

Debt advice from a lawyer: What are the costs?

The great advantage of state or non-profit debt counseling is that it is usually offered free of charge. As already mentioned, however, debtors usually have to wait a long time for an appointment.

This problem usually does not exist with debt counseling from a lawyer. For this, however, debtors should be aware that there are costs for the advice. Often lawyers offer a free initial consultation. Poor debtors also have the option of applying for a counseling aid certificate.

Make sure that the debt counseling lawyer presents the costs transparently right from the start. You should be informed about the exact composition of the fee and when you will have to pay. How high the costs for debt counseling by a lawyer are exactly cannot be given in a lump sum. The requirements of the Lawyers’ Remuneration Act must be observed here, and the amount of debt also plays a role.

Also keep in mind the following: If personal bankruptcy is inevitable, this procedure will also incur costs. These are not covered by the state and cannot be financed under legal aid.

The bankruptcy estate in bankruptcy proceedings

If debtors are no longer able to meet their payment obligations and an out-of-court attempt to reach an agreement could not reach a compromise with the creditors, many debtors only have to take the step into bankruptcy. Due to the judicial debt regulation, it is usually possible to get the remaining debt released after a six-year phase of conduct.

In the course of filing the application, however, the responsible bankruptcy court checks very carefully whether the requirements for opening bankruptcy are met. This includes, for example, that there must be a reason for insolvency (usually insolvency) and whether there are enough bankruptcy assets to be able to bear at least the legal costs. Otherwise the lawyer speaks of mass poverty.As a rule, the court will not open the proceedings if the mass poverty has already been established in advance. However, it can also happen that mass poverty only emerges during the insolvency proceedings, for example because the proceeds from the sale of an object from the insolvency estate (i.e., a property) fell short of expectations. In such a case, the court will normally decide to terminate the proceedings on the basis of Section 207 due to lack of assets.

Preventing the termination of proceedings: deferral of the costs of the proceedings

In addition to the termination of the proceedings, which would have far-reaching consequences for the debtor, the insolvency code offers two other ways to counter the problem of mass poverty:

  1. Advances a sufficient amount of money
  2. Deferral of procedural costs according to § 4a

Advancing a sufficient amount of money is probably not possible for most insolvent debtors, especially with mass poverty. In many cases, therefore, only the second option remains – the deferral of the procedural costs:

(1) If the debtor is a natural person and he has submitted an application for discharge of residual debt, the costs of the insolvency proceedings will be deferred upon application until the discharge of residual debt is granted, insofar as his assets will probably not be sufficient to cover these costs. (Section 4a (1) sentence 1)

There are therefore two prerequisites in particular in order to be able to expect deferral of the procedural costs in the case of mass poverty:

  • First, it must be a natural person. The deferral is not open to legal persons and companies.
  • Second, the debtor must have applied for residual debt discharge, which can only be submitted together with the bankruptcy petition.

Effects of a moratorium

If the deferral is approved, the insolvency proceedings can take place despite mass poverty and the debtor has the opportunity to still obtain the discharge of the remaining debt. As a result, the debtor no longer has to repay all liabilities that already existed up to the opening of bankruptcy – and is thus de facto debt-free.

The advantage of a deferral is that the procedural costs are only due after the remaining debt has been released. So, so to speak, court and lawyer fees are suspended until the remaining debt is paid. There is also the possibility that debtors agree to pay in installments with the court as soon as the costs are due.