When grappling with economic hardship, bankruptcy may provide the best opportunity to obtain a fast fresh financial start. While it is true that you are not legally required to hire an attorney, filing for bankruptcy on your own, known as filing “pro se,” comes with serious risks. Bankruptcy law is complex, requiring knowledge not only of the U.S. Bankruptcy Code, but also the Federal Bankruptcy Forms, Federal Rules of Bankruptcy Procedure, state laws, the local court rules and filing procedures in the district where your case is filed. Additionally, a debtor is required to attend a creditor meeting before a U.S. trustee that can be quite intimidating.
Mistakes in your bankruptcy papers, the petition, schedules and statements required by the Bankruptcy Code can prejudice your rights, cost you property or even result in your case being dismissed or being forced to convert to another chapter. Before attempting a pro se bankruptcy filing, it’s important to understand the potential pitfalls and why using an experienced attorney can make all the difference in having a successful case and is well worth the investment. It can also make the process a lot less stressful. Based upon our 28 years’ experience representing clients in chapter 7 and chapter 13 bankruptcy cases and attending countless 341(a) creditor meetings, these are some of the common issues that we see when someone files a bankruptcy case without an attorney:
Common Pro Se Bankruptcy Issues
Exemption Issues: Bankruptcy exemptions protect certain property in bankruptcy, but if you fail to claim the correct exemptions, or if you own property with equity beyond the exemption limits, the trustee may liquidate those assets to pay creditors. Commonly targeted assets include equity in a home or vehicle, pending tax refunds, bank account or brokerage balances, interests in inheritances or lawsuits, and proceeds from personal injury claims. Losing a home or other valuable assets due to an exemption mistake is one of the most devastating consequences of filing without the guidance of an experienced bankruptcy attorney.
Improper Transfers and Preferences: If you repaid or transferred money or property to family, friends, or certain creditors within a certain timeframe prior to filing, the trustee can potentially seek to undo those transfers and sue the party that received it. These “preferences” or “fraudulent transfer” issues often surprise pro se filers who thought they were simply helping loved ones or paying off allowable debts before filing for bankruptcy.
Deficient Filing Issues: Section 521 of the Bankruptcy Code requires debtors to file certain documents with the Court. If the documents required under §521 are not provided by the debtor by the 45th day after the filing of the petition, the case is automatically dismissed on the 46th day. By request from the debtor within the initial 45 days, the bankruptcy court can allow up to 45 additional days to file the information required by §521. For a pro se debtor, providing the required documentation and schedules can be both difficult and stressful and can result in the automatic dismissal of their case.
Providing Documents to the Chapter 7 Trustee: Over many years of attending 341 Meetings, we have noticed one glaring fact about pro se cases. In many of these cases, the debtor has not provided the required documents to the Trustee. This is a separate requirement and is not satisfied by filing documents with the Bankruptcy Court. Most Trustees use online portals to allow debtors to securely provide documents to the Trustee. Debtors who are not internet-savvy may have extreme difficulty using these portals. As a result, we see their meetings get adjourned and their cases delayed. If documents are not provided after the adjournment, a motion to dismiss the debtor’s case may result.
Issues at the 341 Meeting: All debtors are required to attend a 341 Meeting of Creditors, where the trustee questions the debtor regarding their petition and other probing questions regarding their finances. This hearing can be quite intimidating for a debtor appearing without counsel. If the trustee requests documents or requires amendments to a petition to fix any deficiencies, prose debtors often feel overwhelmed and unsure how to respond. This can cause a case to remain open for months and may even result in a motion to dismiss or a denial of discharge.
Overly Aggressive Budgets: If your budget has unreasonably high expenses or shows more disposable income than you realize, the trustee or U.S. Trustee may argue that you can afford to repay at least some of your debt back to creditors. This can happen when, for example, if a debtor pays very low rent or has low monthly expenses in their monthly budget. In such cases, a motion may be filed to convert your Chapter 7 case into a Chapter 13 repayment plan, something many debtors were trying to avoid in the first place. It is also crucial to properly compute your income in a petition. If a debtor is forced to correct an income calculation error that leads to additional income, that can cause there to be a surplus of income in a budget.
Means Test Issues: The Means Test is a budget test in the Bankruptcy Code, which is used to determine if debtors with a majority of consumer debt are eligible for Chapter 7 bankruptcy if their household income is above the median for their household size. It is one of the most technical aspects of a bankruptcy case. Errors in the means test calculation can result in the trustee challenging your eligibility for Chapter 7, a referral to the U.S. Trustee for further review, or conversion to Chapter 13. Since the Means Test is technically complex, it is often difficult for pro se filers to complete correctly.
Avoiding Petition Preparers and Software Shortcuts: Some debtors turn to non-attorney petition preparers, bankruptcy software, or online services such as Upsolve, EzBankruptcyForms, or 1ClickBankruptcy that promise to make filing easy. While these tools may help complete forms, they cannot provide legal advice about which exemptions apply to protect your assets, whether your home or other assets can be protected when filing for bankruptcy, or how to respond if a trustee or US Trustee challenges your filing or attend court hearings. Court employees are also prohibited from providing legal advice, which means if your case runs into trouble, you are entirely on your own.
Risks of Pro Se Filing
There are major risks of filing for bankruptcy pro se and “going it alone.” You may lose valuable property such as your home, face dismissal of your case, be denied a discharge, or require you to convert your case to a Chapter 13 payment plan against your wishes. Furthermore, once a Chapter 7 case is filed, you cannot simply withdraw or cancel it. Chapter 7 bankruptcy cases cannot be withdrawn without court approval, and courts are reluctant to grant such withdrawals. Generally, a debtor can only withdraw or dismiss their Chapter 7 bankruptcy case if they have a valid reason and they can show that “good cause” exists for the withdrawal. Additionally, the debtor must show the Court that the dismissal is in the debtor’s own “best interests” and that the creditors in the case will not be prejudiced by the dismissal. If your case involves non-exempt assets that could be liquidated to pay creditors, meeting such a standard is highly unlikely.
How an Attorney Can Help
Hiring a qualified and experienced bankruptcy attorney can give you the guidance and protection you need. An attorney can:
- Clearly explain the bankruptcy process and make it less stressful
- Advise whether filing for bankruptcy is the right option for you
- Help you decide which bankruptcy chapter to file under and best qualify for
- Identify which debts can be discharged
- Protect your home, car, and other assets through proper exemptions
- Review payments and transfers to prevent transfer or preference issues
- Accurately perform the Means Test calculation, if required
- Complete and file all required forms and schedules
- Prepare you for and represent you at the 341 Meeting and in Bankruptcy Court
Most importantly, an attorney can anticipate potential issues before they arise and guide you through the process with confidence.
Contact the Law Offices of David I. Pankin, P.C.
While filing bankruptcy pro se may seem like a way to save money, it may result in costly mistakes that could jeopardize your fresh start. Bankruptcy law can be quite complicated, and the stakes are high, especially if you are trying to protect your home, car, or other potentially exempt assets.
At the Law Offices of David I. Pankin, P.C., we have helped over 15,000 clients navigate the bankruptcy process successfully and obtain a discharge. We are here to answer your questions, protect your assets, and help you achieve real debt relief. Contact us today at (888) 529-9600 for a free consultation or use our easy online contact form.
