Risks of Self-Representation in Bankruptcy

Anyone declaring bankruptcy is legally entitled to self-representation, as nowhere in the United States Bankruptcy Code is it stated that the petitioner must hire an attorney. However, nearly anyone who has experience with the process, and even the Federal Government, will advise you to retain a lawyer to represent you in your bankruptcy petition. This area of law is highly complex, and it poses challenges even for those with a thorough understanding of the subject. The chance that a petitioner will make errors or omissions is great, and the consequences of doing so can be significant.

With the 2005 enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act, Congress implemented a number of reforms to bankruptcy law, including stricter eligibility requirements for individuals seeking to file under Chapter 7. Among these is a "means test," a screening step which determines whether the petitioner is the dire straits which call for this swift and sweeping form of debt relief. Chapter 7 enables the individual to discharge nearly all debts within a period of months, and there is a risk that unscrupulous debtors might abuse this opportunity. The means test essentially compares the debtor's aggregate monthly income over the past five years against the debt. Many people who are eligible for Chapter 7 mistakenly disqualify themselves by failing to take advantage of certain allowances which can be used to improve the result of the means test.

Even if you pass the means test, your petition could be denied if you miss one of the deadlines for filing paperwork, if you fail to supply all the necessary documentation, or if you accidentally provide false information to the court. An attorney can take on the responsibility of keeping track of everything you need and will help you find a way through the administrative procedures involved in declaring bankruptcy.

When your petition is approved, the court will assign a trustee to your case. One of the trustee's functions is to attempt to liquidate your personal assets in order to pay back your creditors. Individuals who declare bankruptcy pro se frequently end up losing some of their private estate—including family heirlooms, home furnishings and other assets—for failure to apply exemptions which are available under state and federal law. The bankruptcy trustee is not your ally, so it is in your best interests to retain legal representation to protect your interests in the situation. Hiring an attorney vastly improves your chances of having a "no-asset" case—one in which nothing you own is subject to liquidation.

Representing yourself also exposes you to the possibility of reaching the end of the bankruptcy process with certain debts intact, which might have been possible to discharge. Bankruptcy does not automatically wipe the slate clean, but must be carefully administered in order to ensure that the maximum amount of financial obligation is relieved for the debtor. Regardless of how much debt you discharge, it will have a major impact on your credit report for up to 10 years, so you should do everything you can to take full advantage of the occasion and ensure that you are not left owning anything more than absolutely necessary.

We Will Represent You

Even with all of the potential hazards of a pro se filing, you may still feel prepared to tackle the challenges involved in declaring bankruptcy—and you may be right. If on the other hand you would prefer to take the safe approach, contact an attorney at the Law Office of Robert W. Kovacs, Jr. today for a free consultation to discuss your options and begin the process. The firm has been assisting individuals and families in your position for many years, and is ready to begin working on your case today.