Should I Risk Filing For Bankruptcy Without An Attorney?

Discussing The Risks Of Declaring Bankruptcy Pro Se In Arizona

When creditors are about to begin collections, and it feels like you have nowhere else to turn, bankruptcy can put a hard stop to the cycle with asset protection through the automatic stay and debt relief upon discharge. It can provide a more stable basis from which to rebuild your credit. But many people who file for bankruptcy don’t do it months in advance of the make-or-break moment pertinent to their situation. A large percentage of debtors file for bankruptcy without funds for basic resources, much less attorney’s fees. But filing for bankruptcy isn’t free, and proceeding without attorney representation comes with significant risks. Read on to learn more about the factors you should consider when deciding if you should retain bankruptcy counsel for your filing. For your free consultation with a dedicated staff member from Chapter Bankruptcy Lawyers, call 480-405-1010. 

Mistakes in the Means Test

The Means Test is an important calculation used in both chapter 7 and chapter 13 bankruptcy. It is used to show a debtor’s disposable monthly household income. Negative or very low disposable monthly household income can be used to show that a debtor is income-eligible for chapter 7 bankruptcy. It can also be used to calculate how much a debtor will pay per month in chapter 13 bankruptcy. Therefore, mistakes in the means test could force the debtor to convert bankruptcy chapters, or make them entirely ineligible for bankruptcy. 

Why is the Means Test so prone to errors? There are many expenses that must be factored in, and whether they are considered reasonable could be at the court’s discretion. The first step in the means test is determining average monthly household income from the last six months. Next, the debtor should total how much they spend per month on necessities. For some of them, the court will only allow a certain amount per month to be counted towards means test expenses. Mandatory expenses are deducted from average monthly income, and if the result is negative, the debtor qualifies for chapter 7 bankruptcy. That number is also how much the debtor can theoretically pay into chapter 13 bankruptcy. There could be issues if the debtor has variable income, the trustee disagrees with their monthly expenses, etc. If this results in a case dismissal, the debtor will lose the automatic stay and be back at the mercy of their creditors. 

Not Getting the Most Out of Bankruptcy

A debtor may never be aware of some mistakes made in the bankruptcy process because they result in lost opportunity instead of court-imposed penalties. For example, they might file before receiving their tax refund and end up having to later surrender it to the bankruptcy trustee. If the debtor wasn’t in a bind, they possibly could have waited until after receiving the refund, and spending it on reasonable expenses, to file their petition. The debtor could have qualified for both chapters of bankruptcy and had their needs served better by the chapter they didn’t choose. An informed attorney will make sure their client doesn’t miss out on these types of details that could help set them up better for the future. 

Improperly Applied Exemptions

Exemptions are a major part of bankruptcy law for any debtor who owns property, assets, and possessions. Without them, they would be considered part of the bankruptcy estate, and fair game to sell and pay off debts. So if the debtor mistakenly estimates their property’s value or doesn’t understand how the exemption works, their asset may not be fully protected in bankruptcy. If the asset is sold at auction, the debtor can be returned funds in the amount of the exemption, but any excess will be distributed amongst the trustee and creditors. This could be devastating for the debtor, and negate all the positive effects of filing for bankruptcy. An experienced bankruptcy lawyer will make sure exemptions are applied correctly so their client can retain their assets through bankruptcy. 

Extreme Cases: Bankruptcy Fraud Charges

It is natural for debtors- especially self-represented debtors- to occasionally forget to include something in their bankruptcy petitions. But if the omission is found to be willful or intentional, it could actually be a crime. There are a number of ways that someone can commit bankruptcy fraud. They might file under a false identity, conceal assets, file multiple times in different jurisdictions, or lie on their bankruptcy forms. Concealing assets is the most common form of bankruptcy fraud, but all versions of it come with serious penalties if caught. A defendant convicted of bankruptcy fraud can be ordered to serve up to 5 years in prison and pay a fine of up to $250,000. Want to avoid allegations of bankruptcy fraud, even if the misrepresentation is unintentional? A skilled bankruptcy attorney knows the ins and outs of bankruptcy law, so you reap as many benefits out of the system as possible without crossing the line. 

Attending Your Hearings Solo

Every step of the bankruptcy process becomes your own responsibility if you file without retaining an attorney. Gathering all of the correct documents and turning them into a full and accurate bankruptcy petition is a task in itself. So is filing it with the court and keeping up with all other filings throughout your case. Another bankruptcy feature that gives solo debtors anxiety is the 341 Meeting of Creditors. This is a hearing that all bankruptcy debtors must attend. The simplest task to be completed at the 341 Meeting of Creditors is verifying the debtor’s identity. The trustee may have questions about the petition that the debtor finds difficult to answer. And as the name suggests, the debtor’s creditors have the right to attend this hearing. They can ask questions and bring objections that may throw you off course. But if you retain an attorney, they will attend the hearing by your side and help you navigate difficult issues that may arise. Chapter 13 debtors must also attend a plan confirmation hearing, and other hearings could be held based on what happens in a bankruptcy case. A skilled attorney will be prepared for any type of bankruptcy hearing so that their client can stay on the path to discharge. 

Learn More About the Affordable Way to Pay for High-Quality Bankruptcy Representation in Arizona

You may agree that hiring an attorney can yield better results in your bankruptcy case, but not have the funds to pay attorney’s fees in addition to filing fees before the automatic stay stops debt from draining your accounts. The filing fee for chapter 13 bankruptcy is currently $313, and $338 for chapter 7 bankruptcy. Paying this can already be overwhelming without including attorney’s fees. But our office offers payment plan options for qualified clients to take the stress out of paying for bankruptcy representation. While most firms require payment in full up front, we spread your fees out into affordable installment payments at 0% interest for 12 months after filing. See if you’re eligible and learn more about filing for bankruptcy in Arizona today with a free consultation by phone. Get scheduled with Chapter Bankruptcy Lawyers today at 480-405-1010.