FILING BANKRUPTCY ON YOUR OWN - DANGERS, PITFALLS AND GUIDANCE

It is possible for a debtor to file a bankruptcy petition and all the related schedules, statements, certificates, matrices, motions, notices, deeds and other required documents and pleadings without hiring a lawyer, but doing so is very complicated, time-consuming and tedious.  A typical "simple" Chapter 7 bankruptcy petition contains around 75 pages that have to be properly formatted and timely filed according to the complex, strictly enforced and constantly changing rules of bankruptcy procedure.  When a debtor files a bankuptcy without a lawyer, the case is called a "pro se" case.

However, while the courts allow pro se filings, they strongly discourage it.  The following information comes from the bankruptcy court's website:

It is very important that a bankruptcy case be filed and handled correctly. The rules are very technical, and a misstep may affect a debtor's rights. For example, a debtor whose case is dismissed for failure to file a required document, such as a credit counseling certificate, may lose the right to file another case or lose protections in a later case, including the benefit of the automatic stay. Bankruptcy has long-term financial and legal consequences - hiring a competent attorney is strongly recommended.

We have seen pro se debtors make terrible mistakes - mistakes resulting in the loss of property - property that could have been protected if the case had been handled properly.  Here are some of the biggest mistakes pro se debtors make:

GETTING THE LAW WRONG

Bankruptcy is very, very complicated.  The basic bankruptcy law is federal law that takes up an entire Title of the U.S. Code, but most of the property exemptions and many of the exceptions apply state laws.  And all of these laws are always changing.  A bankruptcy attorney needs to be familiar with all of the federal and state laws that affect bankruptcy cases - tax laws, domestic relations laws, tort laws, real estate laws, property laws, criminal laws, and more.  To make things even more complicated, judges around the country are constantly interpreting the law by rendering opinions that change the way the law is understood.

If you get the law wrong, you can get into big trouble real fast.  The internet really only makes things worse - there is a lot of unreliable, incorrect and outdated information online that pro se debtors misuse.

GETTING THE PROCEDURE WRONG

The Federal Rules of Bankruptcy Procedure take up an entire book of their own.  The Rules are strictly enforced and the courts cannot give pro se debtors leniency when they fail to comply with them.  In addition to the Federal Rules, local courts have Local Rules that are also strictly enforced.  Finally, different judges and trustees have policies that must be understood to make a bankruptcy filing work.

All of this makes for a minefield that lies waiting to blow up a bankruptcy case.  There are filing form requirements, notice requirements, certification requirements, documentation requirements, payment requirements and strict deadlines.  A tiny mistake in following the rules can lead to the dismissal of a case, the loss of property, the forfeiture of a defense to a claim or even the loss of a right to file another case.

GETTING THE FACTS WRONG

It is common for a pro se debtor to fail to properly list property, debts, claims and financial information, and even a good faith honest mistake can have disastrous consequences.  An experienced bankruptcy attorney will analyze the client's financial condition thoroughly and will make sure the facts are right on paper.

FRAUD AND ABUSE

Some pro se debtors choose to file on their own because they intend to lie or cheat and they know an attorney won't help them.  The problem for these debtors is that the courts, the trustees, the IRS and the FBI are on to them from the beginning.  Bankruptcy petitions are scrutinized extremely carefully and are subject to random and selective audits. This path leads to prison, as the following links demonstrate:

"Dallas Woman Sentenced To 12 Months In Federal Prison For Committing Perjury Related To Bankruptcy Filings"

"Roanoke Business Owner Sentenced"

"Virginia Woman Sentenced to Six Months in Jail for Bankruptcy Fraud"

FILING WITHOUT A LAWYER

If you file a bankruptcy case pro se, at a minimum you should read the Federal Rules of Bankruptcy Procedure, Title 11 of the United States Code and the Local Rules of the United States Bankruptcy Court that will have jurisdiction of your case.  Make sure you are familiar with the state property laws and all tax laws.  Make sure you list ALL your property and ALL of your debt - do NOT hide anything and do NOT forget anything.  Be diligent, careful and honest throughout the process.

BEWARE OF BANKRUPTCY "PETITION PREPARERS"

The law allows so-called "bankruptcy petition preparers" to draft bankruptcy paperwork and the law allows them to charge a reasonable fee for their services.  However, they are NOT permitted and are NOT qualified to provide legal advice - they are only allowed to type the information you give them into forms. Here is what the court's website has to say about using a petition preparer:

Beware of bankruptcy petition preparers who do not comply with all legal requirements. The role of non-attorney petition preparers is solely to type information on Bankruptcy Forms. Petition preparers are barred by law from providing legal advice - they cannot explain how to answer legal questions or assist in bankruptcy court. Petition preparers must sign all documents they prepare; print their name, address, and social security number on such documents; and furnish copies to the debtor. They cannot sign a document on the debtor's behalf or receive payment from the debtor for court fees.

Unfortunately, there is an underworld of crooks and fraudsters who market their services as "paralegals" and who sell paperwork illegally.  These people are not licensed or qualified and you should avoid using them.  Under no circumstances should you obtain legal advice from them.

LEGAL AID

If you cannot afford to hire an attorney and if you meet the financial and other requirements, you may receive free assistance from Legal Aid.  Please click HERE for more information.