Do It Yourself Bankruptcy
If you have little or no money, a "do it yourself bankruptcy" or filing bankruptcy online may seem like a good way to save money. It's not! If you want your bankruptcy to go well, you really need the help of an experienced consumer bankruptcy attorney.
Trying to file for bankruptcy yourself is a bad idea. Here’s why:
- A bankruptcy attorney may be able to help you avoid bankruptcy. Depending on the details of your financial situation, the attorney may suggest that you consider another option for getting out of debt rather than filing for bankruptcy.
- Bankruptcy is a very complicated legal process. The federal bankruptcy law and the rules that govern the process are complex and confusing. Trying to understand and comply with them is likely to only make your situation more stressful than it already is.
- Mistakes can be costly. If you mishandle some aspect of your bankruptcy or miss a deadline, which is apt to happen if you act as your own attorney, you may lose assets you might have been able to keep if you were working with an attorney, or you may be denied a discharge of your debt. When debt is discharged it’s erased – you don’t have to pay it. Also, it’s possible that your bankruptcy might get dismissed, which would put you at the mercy of your creditors and debt collectors again.
- You could be charged with bankruptcy fraud. You will have to complete many detailed financial forms to begin your bankruptcy, and if you don’t fill them out correctly some of your debts may not get discharged. It’s even possible that because of an innocent mistake you make when you complete the forms, you could be accused of bankruptcy fraud -- a serious offense!
- You may do things prior to the start of your bankruptcy that will affect its success. There are certain actions you should not take during the months prior to filing for bankruptcy. If you take them, your actions could affect how much of your debt gets discharged and you might even be accused of fraud. A bankruptcy attorney will warn you about what you should not do prior to filing. The attorney will also suggest strategies and options that could help you keep more of your assets and save you money in the long run.
- Once your bankruptcy begins, you may have to deal with creditors and collectors who want you to pay what you owe. As soon as your bankruptcy paperwork is filed with the court, an automatic stay is issued, which requires creditors and collectors to stop trying to collect from you. Sometimes however, a creditor or collector will ignore the automatic stay. If that happens and you are acting as your own bankruptcy attorney, you will have to deal with that creditor or collector at the same time that you are trying to get through the bankruptcy. Trying to do both could make an already stressful situation even more stressful.
- You may be legally out-gunned. If you file a Chapter 13 reorganization bankruptcy, you must prepare a written plan that explains exactly how you will handle each of your debts, and the court must approve your plan. Getting that approval will require that you work closely with the bankruptcy trustee who has been assigned to your case and you may also have to negotiate with your creditors if they don’t like what your proposed plan says you will do about the money you owe to them. The creditors will be represented by their attorneys during the negotiations -- attorneys who understand the ins and outs of bankruptcy and who have been involved in similar negotiations before. So you will be at a serious disadvantage if you try to file a do it yourself bankruptcy.
- You don’t know how things work. Different bankruptcy courts tend to have slightly different rules. Bankruptcy attorneys who practice law in a particular court know its rules and how to use them to benefit their clients as well as how to get around the rules. The attorneys also have established relationships with the judges in the court where they practice as well as with the trustees and with the attorneys who represent creditors in a bankruptcy. Those relationships can work to the advantage of the attorneys’ clients. If you act as your own attorney however, you won’t know the rules nor will you have relationships with any of the players in your bankruptcy.
Warning! Steer clear of low-cost "petition preparation services." This kind of service will prepare your bankruptcy filing paperwork, but it cannot offer you any legal advice. Trying to save money by using a petition preparation service could cost you money in the end!
Read our series: Declaring Personal Bankruptcy
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This website does not provide legal advice.
All information is for educational purposes only.
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