December 17, 2017

Bankruptcy Without an Attorney

Lincoln said “The man who represents himself has a fool for a client”

Unfortunately for those in financial hardship, filing for bankruptcy protection isn’t free.  Too often, I counsel people who need bankruptcy protection who haven’t saved the money for the court costs or attorney fees. And sometimes, I meet with new clients who may have been able to save a troubled business if they’d just gotten some legal advice earlier rather than later. This is usually because they have tried valiantly to pay their debts at any cost, instead of saving the money for bankruptcy protection or other legal help with their financial problems.

If these folks would have come in for a free bankruptcy counseling session I could have advised them how to conduct their financial affairs in order to best protect themselves, their families, their employees, and their financial future.

Individuals who are truly without financial resources may be eligible for bankruptcy assistance through Legal Aid of North Carolina.

Self-representation in bankruptcy

Corporations and partnerships filing a bankruptcy case must be represented by an attorney while individuals may represent themselves in bankruptcy court.  The US Courts website offers resources and a great deal of caution for those who pursue that path.

It is very important that a bankruptcy case be filed and handled correctly. The rules are very technical, and a misstep may affect a debtor’s rights. For example, a debtor whose case is dismissed for failure to file a required document, such as a credit counseling certificate, may lose the right to file another case or lose protections in a later case, including the benefit of the automatic stay. Bankruptcy has long-term financial and legal consequences – hiring a competent attorney is strongly recommended.  ~US Courts

Cheaper to do it right the first time than to clean it up afterwards

Individuals who file for bankruptcy protection without a lawyer do so at their own risk. I have been approached by several individuals who filed their own bankruptcy petition, without a lawyer, only to find that they have gotten themselves into hot water with their bankruptcy trustee or the bankruptcy judge. It is usually cheaper and easier to do things right in the first place than it is to hire an attorney to clean up a mess once it’s been made.

Just as troublesome are the cases in which a pro se (a non-attorney representing him or herself) debtor unwittingly files a bankruptcy case and loses assets.

[warning]Within the past few months, I observed a pro se debtor at the meeting of creditors who was questioned by the bankruptcy trustee about retirement funds that had been erroneously claimed as exempt. The pro se debtor obviously incorrectly assumed that cash saved for retirement was protected from creditors, when the fact is that only certain IRAs and ERISA-protected retirement funds are exempt. A consultation with a bankruptcy attorney would have saved this particular debtor tens of thousands of dollars.[/warning]

The risk of bankruptcy fraud

I wrote this article on bankruptcy fraud, which is a cautionary tale for those who would like to represent themselves in bankruptcy proceedings.  Here’s what the US Courts has to say on the matter:

Debtors must list all property and debts in their bankruptcy schedules. If a debt is not listed, it is possible the debt will not be discharged.

The judge can also deny the discharge of all debts if a debtor does something dishonest in connection with the bankruptcy case, such as destroying or hiding property, falsifying records, or lying. Individual bankruptcy cases are randomly audited to determine the accuracy, truthfulness, and completeness of the information that the debtor is required to provide. Please be aware that bankruptcy fraud is a crime.

Before you make a costly mistake, call my office for an initial bankruptcy counseling session. You will only pay for this consultation if you retain my services.

It is very important that a bankruptcy case be filed and handled correctly. The rules are very technical, and a misstep may affect a debtor’s rights. For example, a debtor whose case is dismissed for failure to file a required document, such as a credit counseling certificate, may lose the right to file another case or lose protections in a later case, including the benefit of the automatic stay.Bankruptcy has long-term financial and legal consequences – hiring a competent attorney is strongly recommended.