A bankruptcy case can be planned and filed by the debtor without the aid of counsel. It happens quite often.
In very simple cases, (some would argue that there isn’t such a thing), the debtor sans counsel may escape unscathed but may do so without really understanding the perils they encountered. Bankruptcy law is full of traps that the average filer and even many attorneys aren’t aware of. It isn’t just a simple matter of “filling out forms”.
Some of the more common and serious problems I see when contacted by a debtor who has filed his or her own case are the following:
1. Property is not listed on the schedules
Often the debtor fails to list every asset they own. The question of whether something is an asset or not can be tricky or at least easily overlooked. Examples of overlooked items include:
– an interest in a probate estate – potential lawsuits against creditors, ex-business partners, etc.
– items awarded via divorce decree – stock options
– trust funds – property transferred without recompense to others
2. Missing Creditors
Many debtors that file on their own, think they can simply not disclose a creditor to the Court. Usually, the creditor is a family member, friend, a well-liked dentist, etc. Unfortunately, it doesn’t work like that. Everyone goes in the pot and the law determines how they are treated in an effort to treat all similarly situation creditors….well…similarly.
3. Asset Transfers
The law surrounding asset transfers can be complex. Many of us give things away with no intention to hide the asset from creditors. We are just kind right?. The law though, assumes that if you give something away it is with a bad intention if it was done within a certain period of time and its market value wasn’t given in return. One of the most common questions I get from clients who have non-exempt assets, is, “can’t I just sign it over to my cousin Fred”? uhhh…no.
The unrepresented debtor often doesn’t gain a full understanding of how this works and why it is in place.
4. Income and budget problems
The means test and it’s interplay with the debtor’s actual budget is much more complex then it appears. Courts are continually trying to figure the relationship out. Failure to get it right can lead to a judge dismissing the chapter 7, or the debtor may end up in a chapter 13 plan payment they may not be able to afford.
All of these issues and others that unrepresented debtors encounter pose additional problems. Problems that are not just a loss of assets or paying more than is affordable in chapter 13, but also the potential loss of the bankruptcy discharge or worse criminal charges.
If you have serious debt issues, find a lawyer that has been doing bankruptcy for a while, disclose all assets, all transfers, all debts, and your correct income and budget. Doing it right up front may save you loads of grief in the end.