The Story of One Pro Se Filer

Witness in court
Filing a bankruptcy case without an attorney can be treacherous. Getty Images

I was recently attending a session of Section 341 meetings of creditors with clients. In our district, the meetings are held in a conference room maintained by the US Trustee in the federal court house. The meetings are open to the public, but the only public contingent usually in attendance are other filers, their attorneys waiting for their own cases and the occasional stray creditor. Our meeting room has a table where the trustee, the attorney and the filer sit, but it also has several rows of chairs for interested parties or those waiting for their own cases to begin.

This is helpful setup, and I usually encourage my clients to arrive early so that they can watch the proceedings of a couple of other cases. This does wonders to quell butterflies and show clients that they’re not going to be publicly shamed, yelled at or even criticized.

I say that, then I see a pro se debtor subject herself to the questioning of one of our more experienced and compassionate trustees, I’ll call Mr. Trustee.

A pro se debtor is one who has filed the bankruptcy case without being officially represented by a lawyer. True, there is nothing in the bankruptcy code that requires you have a lawyer when you file a bankruptcy case. Just like you can represent yourself in a divorce or a personal injury case or virtually any other type of legal proceeding. But just because you can represent yourself doesn’t mean you should. Bankruptcy lawyers can seem expensive. But, as many of us explain to our clients, paying $2,000 or $3,000 to a bankruptcy lawyer is an investment in their present and their future that will save them many more thousands of dollars over many years.

And, yes, we do know that you’re broke and that it will be hard to come up with that money. But we can help you figure that out, too. Check out these articles if you want to know how we do that. 

Too Broke to File Bankruptcy?

Too Broke to File Bankruptcy? Part 2

Filing Bankruptcy Without a Lawyer: Can or Should You? 

So, Ms. Debtor arrived late to her meeting, explaining that she had mistaken the meetings in the adjoining room (conducted by another trustee) as the one she was expected to attend. She hurried over when she was told she was in the wrong place. Not a huge issue. I’ve done the same thing when I’ve been caught without the notice that contains the trustee’s name.

Once the trustee invited her to sit down, things got really interesting.

You see, there are really several types of filers.

There are the people who truly have lots of debt, but no assets worth anything. These folks are often less sophisticated in the ways of courts and business and such and would never dream of attempting to represent themselves. Ironically, these folks would probably sail through just because they have nothing in the way of property that would interest a bankruptcy trustee.

There are those folks who have amassed a lot of assets. Generally, these filers are more sophisticated in the ways of courts and business and such and know what’s at stake and would never dream of representing themselves. Now, these folks would have a fair chance of making it through a case on their own. They may have property that would interest a trustee, but they may also have the experience, the patience and the time to learn the process and do it right.

Then there are those who’ve been playing the game for a long time, perhaps they’ve been in business or are in business for themselves. They’re usually pretty savvy about most things and think that there isn’t any reason why lawyers should have anything up on them. These are the folks who think that if they just read enough web sites, or order the right self-help book, they can successfully negotiate the ins and outs and come out the winner. These are the people most in danger of messing up their cases. They know just enough to file, but not enough to protect their assets.

Ms. Debtor clearly fell into the third category. The proceedings started cordially enough. Mr. Trustee showed her lots of deference and even smiled to put her at ease. She identified herself and the trustee started to question her.

Did she list all her debts? Yes. Did she list all her assets? Yes, she believed she did. As he’s asking these questions, he’s reviewing her paperwork on his computer monitor. Something caught his eye, and he began to lose his compassionate demeanor. He became very serious and businesslike.

What had happened? Ms. Debtor appeared to be smart and sophisticated. She was dressed nicely and presented herself well with appropriate respect toward Mr. Trustee and not at all belligerent.

Under the trustee’s expert questioning, the issues began to present themselves. It seems that she had owned several businesses in recent years, including a salon, and currently makes her living as a hair stylist. But she did not list her businesses on her bankruptcy schedules. She did not list them as assets or former assets. In fact she could not tell the trustee whether they were sole proprietorships, partnerships or corporations.  But that was just the first issue that the trustee acknowledged.

An even more important issue concerned her tangible personal property. Although she had personal property, like furniture, clothing, tools of the trade, kitchenware, all listed items on her property schedules, she failed to list any of those items as exempt. That’s a big problem for anybody who expects to keep any of their property.

Everybody is allowed to keep certain types of property for their fresh start, but the property has to be claimed as exempt on the bankruptcy paperwork. There’s a special schedule just for listing and claiming exemptions, Schedule C. Ms. Debtor had apparently listed nothing.

At this point Mr. Trustee stopped the proceedings.

“Did someone help you with your paperwork?”

“Yes. A paralegal.”

“Who was it?”

“Her name was Lee Galasst.’

They discussed where Ms. Debtor got Ms. Galasst’s name.

“Did Ms. Galasst give you legal advice?”

“No, sir.”

“Well, when you got to the part about your property did she tell you what to put there?”

“No, sir. I told her what to type.”

“Ms. Debtor, I know you feel like you can’t afford an attorney, but your schedules are a mess. I cannot give you legal advice, but with the schedules as they stand, you could lose everything you own. You need to find an attorney who will help you. Call the local bar association. They will help you find someone.”

Trustees are very concerned about how bankruptcy petition preparers interact with their customers and whether they are giving legal advice.

She was close to tears as she gathered her file and strode from the room. I would not be surprised if one of my colleagues didn’t follow her out into the hall. I might have myself but for the fact that my clients were coming up next in the queue.

This is a common pattern I’ve seen in pro se cases. They can figure out how to list all their debts. That’s pretty straight forward. They can usually figure out how to list their property, although it is not unusual for them to forget the things that they can’t see with their own eyes, like bank accounts, stocks, interests in businesses, annuities, life insurance, and other items often overlooked even by experienced attorneys. Their trouble usually centers around the exemptions. Some property can be exempted. Some can’t. And every category of property has a dollar limit. Questions constantly arise. How do I value my furniture? Do I list the whole value of the car or just the equity I have in it? What about my clothes? And that appliance I bought at Conn’s. And my 401k, and my daughter’s savings account that I’m on, and my eBay business.

If nothing else, this is the value of your attorney representation. So, the moral of the story? If you have property that’s worth less than the cost of an attorney (say $2,000 to $3,000 in most markets), go ahead and file on your own. If you lose all your property you’re still coming out ahead, right? But if you even remotely have property that could be worth more than that, an attorney’s fee is an investment. Use it.