There’s More To Bankruptcy Than Just Filling Out Forms
There is a great misconception out there shared by many that filing bankruptcy is simple–
that all you need to do is fill out some forms, attend a meeting, and you get rid of all your debts.
This idea is shared by many before they file a bankruptcy case, and by almost no one after the case is filed.
It is certainly not shared by those who call me on a daily basis trying to fix problems caused because they either filed the case on their own or had an inexperienced attorney or paralegal assist them.
Soon, I’m told, it will become even easier to file bankruptcy forms online without an attorney.
But that doesn’t mean you should.
I wish it were that easy, but it’s not and never will be.
For a lucky few, it may work out fine accidentally; but for many, this is taking a huge risk that can result in lots of potential and expensive problems.
Fix Bankruptcy Problems Before They Arise
There are many problems that can be (and some that can only be) fixed by taking actions before you file your bankruptcy case.
Do you know what they are?
Of course not, nor should you. That’s why there are bankruptcy attorneys.
There are so many things that can go wrong in a bankruptcy case I won’t even attempt to list them all in this article (some prior articles listing some of these issues are set forth below).
But here are a few examples of things that can happen when you do it yourself:
- Your case is dismissed because you were not eligible for the Chapter you wanted to file under, either because you didn’t properly analyze the numbers for the means test (Chapter 7) or above the debt limitations (for Chapter 13). There are consequences if you file another case within one year.
- You have assets you want to keep, but you will either lose them or have to pay a larger amount because you did not know how to properly value them or disclose them on your bankruptcy papers, and/or you chose the wrong chapter.
- You have repaid people money in the year prior to filing your bankruptcy case, but you didn’t realize the Trustee can sue them to recover that money.
- You have transferred assets to people in the last 4-6 years and received less than full value for the items and now your creditors or the bankruptcy trustee are suing them to recover what you paid them.
All of the above could have been prevented with proper identification and pre-bankruptcy planning.
There are things you can do to make numbers work out for a bankruptcy filing.
There are ways to protect your assets.
There are ways to prevent issues with those you have repaid.
But you have to know how to do it properly.
There is no way you can spot or know how to deal with these issues unless you have been educated in and practicing bankruptcy law on a daily basis for many years.
Filling Out The Bankruptcy Forms
How you present your information on the bankruptcy forms can be critical, both in terms of accuracy and also perception.
There are ways to explain things in the “paperwork” so that the trustee and judge in your case understand and see no problems.
And there are ways of doing it poorly so that problems arise and you are required to expend a lot of additional funds to fix them.
Here is what the official United States Court website has to say about filing bankruptcy by yourself:
“Individuals can file bankruptcy without an attorney, which is called filing pro se. However, seeking the advice of a qualified attorney is strongly recommended because bankruptcy has long-term financial and legal outcomes.”
The current bankruptcy petition and schedules are approximately 60 pages long with lots of specific information requested. Some questions are more important than others, but all information is being submitted under penalty of perjury.
If you miss something inadvertently because you didn’t understand the question or did not think it applied to you, you won’t go to jail for perjury. But it could cause you a lot of headaches in your case, depending on what the omission or inaccuracy was.
As an example, I have seen bankruptcy cases reopened a year after they were closed when someone discovers that the value placed on real estate by the debtor filing the bankruptcy was just wrong. Or that the debtor omitted assets.
This can lead to the Trustee selling those assets without your approval. Or, in more extreme cases, you can have your entire discharge revoked, which is not a lot of fun.
That’s right, if you fail to disclose material facts on your papers, that is a basis for denial of your discharge and, in egregious cases, prosecution by the FBI (see one example FBI bankruptcy prosecution case).
There is a tremendous amount of work that goes into properly completing a bankruptcy petition and schedules.
There are hundreds of landmines waiting to explode and the unwary will never see them coming.
“But My Case Is Simple”
First of all, how do you know your case is simple?
Do you have years of legal experience handling bankruptcy cases and know where all the complexities lie?
Second, no bankruptcy case is simple anymore. Even the “simplest” bankruptcy case can fall apart by missing one of the multitude of requirements or failing to understand the consequences of dozens of different decisions you make in completing your forms (such as exemptions, valuations, creditor addresses, disclosing repayments, transfers, etc.)
Third, so what? Look at it this way: You could probably do a simple surgery on yourself. Tracheotomies are relatively simple. You cut a vertical incision into the trachea and stick in a tube and “voila!”, you’re breathing again. But why would you risk the infection and other consequences of doing that? Answer: You wouldn’t.
Bankruptcy is obviously not the same as surgery, but it requires a tremendous amount of knowledge and experience to do it properly.
The simpler the submission of bankruptcy forms gets, the more problems you will have filing without an attorney.
I am mindful of Einstein’s brilliant quote in the picture above. We should make things as simple as possible, but not at the expense of accuracy, quality, or safety. There are very expensive lessons to learn if you do not take heed.
It is always cheaper to do things right the first time, than to pay to fix them later. This is very true with bankruptcy filings.
It’s the things you don’t know about but find out about after the fact that will come back to haunt you.
Kristian Bjornard is responsible for the image in this article