Revisiting an area we’ve already discussed, you may still be debating whether filing Chapter 7 yourself is the right option. It’s still best to work with an attorney, but if you decide to attempt to file on your own, you should be aware of the most common mistakes that jeopardize self-filed bankruptcies. Here are seven pitfalls to avoid if you attempt to file Chapter 7 on your own.
1. Filing for bankruptcy before the time is right
Before you file for bankruptcy, it’s essential to review all of your options. Once you have a comprehensive understanding of your options, you’ll be able to make an informed decision about whether bankruptcy is right for you.
2. Filing with the wrong chapter
Most people use Chapter 7 bankruptcy or Chapter 13 bankruptcy when they file. However, there are critical differences between the two. Picking the wrong one could lead to losing property you may have been able to save or not being able to discharge particular debts. It’s also possible you may not qualify to file for one or the other.
- Chapter 13: This option is best, for example, if you’re trying to save your house from foreclosure, eliminate a second mortgage, or reduce a car loan.
- Chapter 7: This is a better choice if you have no assets or a low income. Chapter 7 is generally easier to navigate than a Chapter 13 bankruptcy.
- Failing to include required documents
If you choose to file bankruptcy without a lawyer, the responsibility of submitting all the necessary documents is on you. It’s easy to miss local forms and adhere to local rules. It’s a good idea to visit your local bankruptcy court’s website to determine what’s required.
4. Selecting the incorrect property exemptions
Chapter 7 and Chapter 13 both include different property exemptions. These are often key. Make sure you have up-to-date information on what you can include as an exemption, as the rules periodically change. There are also a number of complexities that arise when you own joint property. In addition, you may run into difficulty if you’re unsure how to list a property or don’t know the equity on your property. A visit to an attorney may save you valuable heirlooms and potentially your car or your home.
5. Failing to complete required credit counseling courses
Both Chapter 7 and Chapter 13 bankruptcy require you to attend a credit counseling session with a provider from an approved list before you can file or take a class on financial management before you are discharged. If you fail to file the correct certificate or fulfill these requirements, your petition can be dismissed.
6. Not being able to defend against adversary actions
In most cases with a Chapter 7 case, after you file for bankruptcy, you attend a meeting of creditors and hopefully get a discharge. But in some cases, a trustee may claim you’ve committed fraud, or a creditor can challenge a debt’s dischargability. In order to be successful in these cases, an attorney may be needed.
7. Not getting help when you need it
Even if you are trying to file bankruptcy without an attorney, it’s important to recognize when it’s time to get help. If the cost of hiring an attorney is a concern, consider weighing it against the cost of your debt or lost property should you lose your case.
8. When Is it Feasible to File a Bankruptcy Without an Attorney?
Generally speaking, the simpler your bankruptcy is, the easier it will be to navigate filing bankruptcy on your own. A few ways to tell if your bankruptcy situation is feasible to navigate on your own include:
- You are able to pass the first portion of the Chapter 7 bankruptcy means test, most likely because your household income is less than the state median.
- You don’t own property or own little property and are able to protect your assets with exemptions.
- You do not have any priority debts that you can not discharge.
- You do not have creditors that are alleging that you have committed fraud or harboring threats around you.
9. When Is it a Bad Idea to File Bankruptcy Without an Attorney?
In general, it is always a good idea to have an attorney who can guide you through the process of bankruptcy. However, there are a couple of bankruptcy situations that do require an attorney in order to make sure you avoid common bankruptcy mistakes. Having an attorney by your side will help you in these situations:
A complicated Chapter 7 bankruptcy:
If you have income that is above the median of your state, or you own a small business, a sizable amount of assets, priority debts, nondischargeable debts, or creditors that can make a fraud claim to you or your business, you will need a bankruptcy attorney to be able to successfully navigate filing for bankruptcy.
Need to file a Chapter 13 bankruptcy:
There are many reasons to file a Chapter 13 instead of a Chapter 7 bankruptcy. A few reasons to file a Chapter 13 bankruptcy include:
- Catching up on mortgage arrears in order to keep your house.
- Eliminate a second mortgage or reduce a car loan.
- Pay back debt that will not be eliminated by bankruptcy over time.
Generally speaking, if you cannot file a Chapter 7, Chapter 13 is the best filing option for your situation. You will need a bankruptcy attorney to assist you in filing for Chapter 13 bankruptcy, as this kind of bankruptcy filing can be increasingly confusing to navigate alone.
Need help with your bankruptcy case? Contact DeLuca & Associates to schedule a free consultation with a price match guarantee.