The Top 5 Reasons Why You Shouldn't Try to File a Bankruptcy Petition On Your Own
By Tracy L. Hirsch
Here’s why bankruptcy attorneys are a vital part of the filing process.
It’s stressful enough to be in debt, and if you’re currently in that situation, you may be thinking that the last thing you want to do is put money toward attorney fees if you decide to file for bankruptcy. While individuals in Louisville, Kentucky are allowed to file on their own, it’s important to understand the risks involved with that.
Filing for bankruptcy is a complex process with a long list of rules that needs to be abided by in order to file successfully. Here are five reasons that show how filing on your own could lead to disaster.
1.) You might file for bankruptcy unnecessarily. Believe it or not, there have been instances when an individual called me for a consultation, and when they told me about their financial situation, I told them that they didn’t need to file for bankruptcy.
Sometimes it’s as simple as settling one solitary debt with a credit card company, and sometimes, the total amount of debt is small enough, that the interest they pay on it will be much less than the cost of filing for bankruptcy.
If the debt is medical-related, an individual may be able to set up a payment plan directly with their doctor’s office or hospital. Regardless, there are a number of scenarios where a bankruptcy might not be the best fit.
It’s important to consult with an experienced bankruptcy attorney to determine whether or not bankruptcy will actually help you in your specific situation.
Hiring a bankruptcy attorney saves you time and money in the long run, and eliminates unnecessary stress.
2.) You might choose the wrong chapter of bankruptcy. Individuals have two options when it comes to filing for bankruptcy — Chapter 7 and Chapter 13. A Chapter 7 wipes out the majority of your debt without any repayment, and a Chapter 13 is a reorganization of debts where you set up a repayment plan to pay back some or all of your debts.
If you have assets, such as a home or car, you’ll want to discuss your options with an attorney to choose the path that will give you the most protection in terms of keeping those assets. In order to determine which is best for your situation, you’ll need to fill out a ‘Chapter 7 Means Test Calculation’ form, which leads to the next point.
3.) You might fill out the Means Test incorrectly. This form helps calculate your debt payments, income, monthly living expenses, and more in order to make some very important decisions in regards to filing a Chapter 7 versus a Chapter 13.
While you may be tempted to fill this out yourself, it’s a lot more complicated than it seems. Underestimating income and even leaving out a source of income such as rental income, alimony, or even year-end bonuses, could result in an objection to your bankruptcy or an allegation of fraud.
4.) If you need to file a Chapter 13, you might miss a deadline that you didn’t know about, and your case could get dismissed. Did you know that you have to complete credit counseling before you file for bankruptcy, and then have to complete a financial management course after you file?
Did you know that you will have a court hearing after you file, which you must attend in order to get your bankruptcy plan confirmed?
Did you know that if you file a Chapter 13, each of your creditors needs to receive a copy of your Chapter 13 repayment plan? In addition, did you know that you are required to review and allow each and every claim filed by your creditors by a specific date?
Also, are you aware that you will have to file your own motions if you need to amend your plan, suspend payments, or borrow money? These are just a few of the many things that you’ll need to know how to do in order to avoid having your case dismissed.
These are complex procedures, and I’ve had multiple individuals come to me after filing on their own because they realized that they were in over their heads.
There are dozens of other rules, regulations, and deadlines that need to be met, which is why it’s a worthwhile investment to hire a Louisville bankruptcy lawyer who can ensure that you will complete everything on the checklist.
You might be thinking that it’s not worthwhile to pay attorney fees, but you’ll most likely break even due to the fact that an experienced bankruptcy attorney can help you negotiate interest rates and lower your payments on loans in both Chapter 7 and Chapter 13 cases.
Additionally, if your income is tight, an attorney can also help you set up a repayment plan where you only have to pay back a portion of your debt instead of all of it. In the end, you could end up saving tens of thousands of dollars by investing a comparatively small amount of attorney fees upfront!
5.) You might inadvertently do something illegal. Did you know that if you file for bankruptcy, then inherit money or win the lottery, you may have to hand some of the money over to your trustee to pay your creditors?
Failing to disclose any possible upcoming inheritance funds, insurance reimbursements, and lawsuit payouts could not only cause you to lose out on that money, but it could also land you in hot water if it gives the appearance that you were intentionally trying to hide that information from the trustee (it’s called an “assumption of fraud”).
There might also be other ways in which you inadvertently create an assumption of fraud.
For example, if you transfer money to family members, max out your credit cards, or even pay off a loan that you borrowed from a friend right before you file for bankruptcy, that will be viewed by the trustee as preferential treatment of creditors and/or an attempt to purposely try to cheat your creditors.
In order to avoid doing something that isn’t “by the book,” it’s important to have an experienced attorney in your corner who can help you.
There are multiple other reasons that highlight the importance of hiring a bankruptcy attorney, but these are some of the common issues that arise when an individual tries to file on their own.
Unfortunately, when a debtor makes a mistake, it can be costly, as they usually end up having to hire an attorney anyway, and then on top of that, they have to pay an additional hourly rate in order for legal counsel to fix the mistakes that were made.
If you’ve been considering bankruptcy, but aren’t sure if it’s right for you, I offer free phone consultations to help you determine the best path to take.
You can text me or call me directly on my cell phone at (502) 435-2593 to set up your free consultation. If you decide to file, we can do the filing appointment over the phone as well.
No matter what your situation is, I’m not here to judge you or shame you. I work hard to break down the stigma surrounding bankruptcy, and offer a compassionate approach to your sensitive circumstances.
I’m just a text or phone call away!
All the best,
Tracy L. Hirsch
Attorney-at-Law
Need a free consultation? Text or call me at (502) 435-2593!