9 questions to ask before bankruptcy
I am in the process of filing Chapter 7 bankruptcy. I am trying to decide whether or not to go with a document filing service or an attorney. An attorney costs five times the amount as the document service and I really cannot afford the attorney fees. Can I do this on my own?
Yes, you can still file on your own, and many people do. In fact,
even after the new bankruptcy law of October 2005, the same percentage
of people qualify for bankruptcy as before (approximately 98 percent).
However, I would not be acting as an attorney if I did not inform
you that "pro se"-filed petitions (the name for those that file
on their own) have a much higher case-dismissal rate than attorney-filed
petitions. Most attorneys have years, even decades of experience;
while a pro-se filer only has hours of experience.
The key determinant to whether you file successfully or not is the complexity of your case. If your case is more complex, that is, if you have different kinds of assets, then knowledge of the laws in your state will be critical to filling out the paperwork properly and receiving a bankruptcy discharge.
A lot of the answer to this question, Lisa, depends
on how good you are at filling out forms accurately, reading and
understanding the fine print on the documents, and researching information
relevant to your case. Without knowing your "Bankruptcy IQ,"
as it were, there are several ways your case can become more complex,
and it might be to your advantage to work with an attorney.
|The answers to these nine questions
will show how complex your case is, and whether you need
an attorney or can file by yourself.
|9 questions to ask before bankruptcy
1. Do you own a home?
A certain amount of equity in your home can be protected but how
much varies from state to state. There are also provisions that
pertain to whether you have recently divorced or been widowed. Especially
important is the valuation of the home, which can greatly impact
whether you file Chapter 7 bankruptcy or a Chapter 13 payment plan.
I retained a client who originally filed on her own, thinking that
she could protect her house. After filing, the trustee assigned
to her case sent her a letter that he would be forcing her to sell
her house or she would have to convert to a Chapter 13 bankruptcy
2. Do you have child support obligations?
Child support obligations now receive a much higher priority than before. You must include in your petition any child support obligation you owe or are entitled to receive.
3. Are you behind in your taxes?
If you have delinquent taxes then you will need to contact the IRS and receive a history of those taxes. Some may be dischargeable, but you will need to do the legwork to determine this.
4. Have you been using your credit card?
One kind of fraud is charging up your cards by buying assets, then
declaring bankruptcy to wipe the debt away. Trustees are very alert
to this kind of behavior. There are legitimate reasons cards can
be charged prior to filing; however, increasingly creditors are
challenging bankruptcies to receive a percentage of the debt back.
5. How long have
you lived in your state?
Most states require that before you can receive your state's bankruptcy protections you must be able to prove that you are a resident for at least the past two years.
6. What's your
If you make more than the average income for your state, you might
not be eligible for Chapter 7 bankruptcy.
7. What's the average income in your state?
You'll need to find out. I once saw a pro-se filer have his case
rejected even though he was only making $1,500 per month. He did
not understand the acceptable expenses he could include and the
trustee had no obligation to educate him. As a result, he has a
bankruptcy mark on his credit report and may not be able to receive
a bankruptcy discharge.
8. Do you have a stock portfolio?
Whether you have a portfolio or you have your own corporation, even
if your stock is valueless, your stock interests must be listed
on the petition as well as who handles the books and who else owns
stock (if anyone).
9. Do you owe on a car loan?
After the new law, car payments must be reaffirmed. This is not so complicated but does require some additional paperwork.
Lisa, you may be one of many people with the simplest of profiles, i.e., you have credit card debt and that's pretty much it. If so, the paperwork is much easier and you can probably obtain a discharge without an attorney. Remember, however, that a percentage of Chapter 7s will be audited for accuracy. Make sure that you disclose everything. Do not keep a credit card with a balance off the petition. Do not "forget" to list any assets. The success of your petition depends on your ability to honestly and accurately execute the documents. If your case is basic and you are confident in your ability to handle the paperwork, I say go for it.
Justin Harelik is a practicing attorney in Los
Angeles. To ask a question of the Bankruptcy Adviser, go to the
"Ask the Experts"
page and select "bankruptcy" as the topic.