Bankruptcy is a safety net for a household that is struggling financially and has run out of options. Filing a bankruptcy petition can immediately stop a lawsuit, repossession, wage garnishment, and more. But despite the nature of bankruptcy, filing a petition to initiate the process of debt discharge doesn’t come cheap. Attorney’s fees are usually the most significant expense in a bankruptcy case, and come in addition to costs like filing fees and credit counseling course fees. Another issue is that bankruptcy attorneys typically require that their fees be paid in full before filing a petition on behalf of their client. It may seem impossible to save up the funds for bankruptcy while dealing with debt, which usually comes with its own wallet-draining expenses. But there are several risks associated with filing for bankruptcy without qualified counsel. Read on to learn more about them so you can decide whether it’s worth proceeding on your own, or if you should at least consult with a bankruptcy attorney about your situation. Our firm offers free consultations by phone so you can take the first steps towards filing for bankruptcy without interrupting your busy schedule. Get scheduled with Atlas Bankruptcy Lawyers today by calling 602-649-4949.
Against the Odds
About a quarter of bankruptcy debtors file without an attorney. These debtors tend to fare significantly worse than debtors who retain a bankruptcy firm to handle their filings. The dismissal rate for pro se chapter 7 bankruptcy debtors is 45.2%, compared to 28.7% for chapter 7 bankruptcy debtors who retain counsel. The odds are even worse for pro se chapter 13 bankruptcy debtors- only 12.5% of self-represented debtors complete their cases, compared to 52.3% of chapter 13 debtors who are represented by bankruptcy attorneys. The number one reason that pro se bankruptcy filings are dismissed is due to a lack of documentation. Another top cause for pro se dismissals is confusion caused by the Means Test. Perhaps expectedly, the number one reason that pro se debtors didn’t retain counsel was because of cost. Taking cost out of the equation, are you confident enough in your legal skills that you will be among the minority of pro se bankruptcy debtors to successfully discharge your debts? A dismissed bankruptcy can wreak havoc on your credit, and you won’t be refunded any fees spent on a dismissed filing. Hiring a bankruptcy attorney greatly increases your odds of clearing your debts, as you likely intended with your filing.
Mistakes Protecting Your Assets
Bankruptcy debtors are allowed to keep certain assets and possessions while participating in the debt relief process. A debtor must list everything they own in their bankruptcy petition through a variety of schedules. Even smaller items will need to be included on the debtor’s household inventory. Different bankruptcy exemptions protect different categories of assets. For example, the homestead exemption protects equity in a house or condo, while the motor vehicle exemption protects a debtor’s car. Self-represented debtors are prone to forgetting to apply bankruptcy exemptions or misunderstanding how they are applied. When this happens, the bankruptcy trustee may choose to take the debtor’s unprotected asset and sell it by auction. The exemption amount would be returned to the debtor, but excess proceeds are used to pay off debts from the bankruptcy estate. The bankruptcy trustee also gets to keep a small portion as payment for their services in the case. Don’t assume that the trustee will miss hidden assets or turn a blind eye to unprotected assets. More intentional hiding of assets could even be considered bankruptcy fraud. This is the kind of mistake that could cause you to lose an asset worth thousands of dollars more than you would’ve spent on bankruptcy attorney’s fees.
The Motion To Dismiss For Abuse
Rule 1017 of the Federal Rules of Bankruptcy Procedures sets forth the motion to dismiss for abuse. This is a motion that all self-represented bankruptcy debtors should dread to receive. It calls for a hearing to dismiss a debtor’s bankruptcy case for one or more of several reasons. One of the most common reasons that pro se debtors receive motions to dismiss for abuse is that they used the Means Test to prove they qualified for bankruptcy, but there were errors in their calculations. The motion to dismiss for abuse could be issued because the debtor failed to pay their filing fee in full. The court could also dismiss a bankruptcy case if the debtor fails to file a document on time. The court can abstain by suspending or dismissing a case under 11 U.S.C. § 305. When a case is dismissed, the debtor may or may not have the option to refile their case. Until the case is refiled, they lose protections from the automatic stay and are vulnerable to creditors.
Chapter 13 Payment Plans
If you’re just starting to learn about bankruptcy, you may be wondering why the success rates for pro se chapter 13 bankruptcy debtors are so low. Chapter 13 bankruptcy is a long-term endeavor. Debtors who earn less than the median income for their household size enter three-year payment plans, and those who earn more have payment plans lasting five years. A chapter 13 debtor needs to select the right plan length and make sure certain categories of debt will be paid in full during that time frame. All of this information will be verified at a plan confirmation hearing. Because of the potential for mistakes in plan calculations and misrepresenting that information at the plan confirmation hearing, a high number of pro se chapter 13 bankruptcy cases are dismissed. Sometimes, chapter 13 cases can be converted to chapter 7 filings, based on the debtor’s circumstances.
How to Pay for Bankruptcy Representation After Your Case Has Been Filed
All the information in the world about the risks of filing for bankruptcy without representation won’t magically make the funds for attorney’s fees appear in your bank account. And those circumstances are unlikely to change if you can barely keep up with minimum payments and interest, have a wage garnishment in effect, etc. All of that ends once a bankruptcy petition is filed, but most chapter 7 bankruptcy attorneys require payment in full before that point. This is because their fees are treated like any other debt in bankruptcy, so agreeing to a traditional post-filing payment plan would be an honor system, as the debtor’s legal obligation to pay the debt would be wiped out in bankruptcy. Chapter 13 debtors can work their attorney’s fees into their payment plans, which last either 3 or 5 years.
Our firm employs bifurcation to allow for bankruptcy installment payments after the petition has been filed. Here, your case is first filed as a skeleton petition, which only includes very basic information about your situation. A debtor can begin accruing debts again after a skeleton petition filing. In this payment arrangement, the skeleton petition is completed pro bono, and you are charged for legal work completed after the skeleton filing. Your affordable installments are spread out over 12 months with 0% interest. Schedule your free consultation to see if you qualify today at 602-649-4949.
