The bankruptcy paperwork looks simple on its face.
There are official forms. How difficult could it be?
Individuals are tempted to do it themselves either assuming that they can’t afford a lawyer or that they don’t have anything to lose.
Too often, neither is true.
You’re broke, what can you lose?
You can lose the right to the discharge itself, if your schedules are found to be materially false or misleading.
If you file bankruptcy at the wrong time, you may be locked out of the bankruptcy court for 4 to 8 more years.
Do-it-yourself blunders include:
- Exemptions are not selected or applied to preserve assets
- Property is omitted from the schedules
Debtors forget to schedule intangibles like stock options, partnership interests; interest in pending probate estates; trust funds; lawsuits, filed or potential; tax refunds; or retirement funds.
- Creditors are omitted, either because debtors think that only a certain kind of creditor can be discharged, or omit a creditor because they want to repay the debt.
- Debtors get “cute” about transferring assets to others before filing or deliberately not disclosing assets, on the grounds no one will know
- Schedules underestimate living expenses suggesting that the debtors have ample money to fund a Chapter 13 plan.
- Skipping the pre bankruptcy credit counseling class leads to the dismissal of the case.
- Forget to take the financial management class and file the certificate and your case is closed without a discharge.
- Means test mistakes can trigger a presumption that the filing is abusive and should be dismissed.
These mistakes can lead to the loss of assets that you could have kept, to getting less relief than was available by law, or, in extreme cases, to denial of your discharge under §727.
Before you go the do-it-yourself route, meet with an experienced bankruptcy lawyer to understand the process and the risks.
Ask them the right questions.
Understand the disclosure that’s required.