There are a lot of companies and “do it yourself” people who are stating that an attorney is not necessary to file for bankruptcy. This is true, to a point. You can undertake pretty much any legal proceeding on your own, without counsel. They also say that doing it yourself will be cheaper and that you can get the exact same results as if you filed with a lawyer if only you pay their company to “fill out the paperwork” or just do it yourself without any guidance. That’s where I have a problem.
There are also a number of attorneys out there who state that they will file your case for some ridiculously low flat fee plus the filing fee. I will deal with them in another post.
Pro Se filings, bankruptcy filings without a lawyer involved, are on the rise. In fact, several bankruptcy courts have put together packets designed to help pro se filers do it themselves – cautioning these pro se debtors that it is not a great idea. I think the reasons the courts are doing this is because the trustees and the judges were tired of reading pro se petitions that would only cost the debtors more money in the long run or were just going to get dismissed. I will go through each of the generally available Chapters and explain why, at least in my opinion and based on my professional experience, going it alone can be a REALLY BAD IDEA. By writing this article I am not saying that the average person should never file pro se and that there may not be very good reasons to do it on occasion but, I don’t tell my mechanic how to fix my car, I don’t tell my doctor what medicine to put me on when I am sick, and I don’t tell my accountant how to prepare my returns. I am go to them for their expertise and I am willing to pay for it because, if I do it myself, bad things can happen.
Chapter 7: Your basic Chapter 7 might be able to be filed and successfully completed by an individual without a lawyer, however I would strongly caution against using a preparation service to help you. All they are allowed to do under the bankrutpcy code and the rules stating what is and what isn’t the practice of law is type the papers up for you. Telling you what to list as assets, how to exempt them, what is and is not a component of your household goods, whether or not you should use state or federal exemptions, telling you in what district to file, advising if you are even eligible to file all may be considered the practice of law. However, I have seen very very unpleasant results when individuals file under Chapter 7 with no legal advice and guessing at what the petition actually says.
Here is the problem – Chapter 7 is liquidation bankruptcy: whatever is not properly exempted, can be sold and will be sold by the trustee if there is any value to be had. Trustees are not going to apply exemptions for you. That is what your lawyer would have done for you. I have seen trustees threaten, in all seriousness, to sell someone’s house from right out under them because they did not apply the exemptions in their Chapter 7 case. The trustee does have that power. In addition, an attorney can be of significant help when figuring out how to value items. There is a big difference between a 2005 Mercedes C class and a 2005 Mercedes C class with no tires, a busted transmission and no CD player. That valuation and knowing what to look for can be the difference between keeping property and losing everything.
Chapter 13: The myriad ways that a pro se chapter 13 petition and plan can go south are too many to list. Many bankruptcy attorneys will not do 13s because they are complex and require a good amount of work. That’s why I find them rewarding to do. Some people have tried to file chapter 13s pro se. When that happens, these plans often fail because they do not comply with the provisions of the code, are unfeasible or the pro se debtor just cannot handle what he got him or herself into.
Chapter 11: Filing these for major corporations takes whole bankruptcy departments at large law firms. The complexities of an individual chapter 11 are rarely dealt with by lawyers, much less individuals. If you have the need for one of these – you can afford and you NEED a lawyer.
Chapter 12: Again, complex, difficult, if you try to go it alone, you may end up without a case, without your discharge and right back where you started.
In all of these chapters, in addition, there is a much more serious risk than losing stuff: if you conceal property or make a serious misstatement on a bankruptcy petition, that is a federal crime, punishable by 5 years imprisonment and up to $500,000 in fines. Is it that worth it to save a few thousand in legal fees?
To sum all this up: can you file bankruptcy without a lawyer? Yes. Should you? Unless you have the absolute bare minimum of possessions and wish to file under Chapter 7, at least CONSULT with an attorney. The fees that most bankruptcy lawyers charge are far less than what you could lose if a mistake is made in a pro se filing.