It is possible to file a Chapter 7 straight bankruptcy or a Chapter 13 payment plan case without a lawyer, but before you do, there are some things you should think seriously about. This is not a decision to take lightly. If you make any missteps, you could end up worse off than you are now.
Here are some things you need to consider.
Filing For Bankruptcy Without an Attorney
From a legal standpoint, there's no issue with representing yourself in your bankruptcy case. It is certainly possible to do so. "Pro se" filers, those who file on their own, have no extra barriers facing them than those who file with the help of an attorney.
While it's possible to file for bankruptcy on your own, the federal court system strongly recommends against it. Filing pro se means that you can only rely on your own knowledge of the legal system and bankruptcy. The judges and other legal professionals you will meet in the process are prohibited by law from providing any assistance.
If you're wondering whether or not you should hire an attorney to help file bankruptcy, consider factors such as how complex your case will be and how comfortable you are researching bankruptcy law.
How Much Does It Really Cost to File Bankruptcy?
If you're thinking about going it alone, you're probably pretty strapped for cash, and you're worried that you won't be able to come up with the funds to hire someone to help you. To some extent, legal representation can indeed be costly. To get quality representation, like most things, you'll need to pay for it.
However, before you jump to any conclusions, you may find that it's more affordable than you think. Many consumer bankruptcy lawyers offer a free initial consultation.
An attorney can also help determine if you're eligible for assistance through legal aid or a pro bono program offered by a bar association near you.
Keep in mind that what you'll pay to file bankruptcy is less than what you'll pay if you continue to try to service your debts. And that's not counting the stress, frustration, aggravation, and years you'll spend rehabilitating your credit.
How Property Complicates Bankruptcy
Your debt may initially seem like the biggest complication, and it can be a serious issue if your creditor challenges the discharge, but it isn't always the biggest concern. The real issue may have more to do with the type and the value of assets.
No debtor in bankruptcy is left with nothing at the end of a case. In every state, a debtor is allowed to keep a certain amount and value of assets needed to get a fresh start. These are called exemptions, and the amounts differ from state to state.
These are called exemptions because the property is exempt from the reach of the court, the trustee, and your creditors.
Exemptions work differently in Chapter 7 than in Chapter 13. If you file a Chapter 7 bankruptcy case while you own property that is not exempt, your trustee can take that property, sell it, and use the money to pay your creditors some of what you owe them. If you have non-exempt property when you file a Chapter 13 bankruptcy, you can keep it, but the value of the assets could be considered when establishing your payment plan.
If you don’t have much more than the furniture in your house and a car or two, it might not be too difficult to keep your property—the key is to carefully list everything you own at a reasonable value. These exemptions vary by state, so this is another area in which your ability to research legal issues will be vital.
Expect Increased Oversight by the Court
Even if it looks like you will not have any non-exempt assets, filing a Chapter 7 case pro se is still a daunting task. Since your situation is somewhat out of the ordinary, your trustee will likely take special interest in your case, if only to ensure you have listed everything properly. The trustee may ask you for additional documents, like copies of tax returns, house papers, car papers, and bank account statements.
Your meeting of creditors may take longer than for filers who are represented by attorneys so the trustee can do a thorough job of examining you under oath. For the same reason, your creditors will often look more carefully at your paperwork.
Keep in mind that the information you provide the court has to be complete and accurate. You will sign your paperwork under penalty of perjury, and later you will have to testify as to its accuracy under oath. The consequences of lying are severe. If you are willing to put up with that much scrutiny, you must still be mindful of the pitfalls you might encounter that can derail your attempt to go it alone unscathed.