If you are thinking about filing for bankruptcy, then you've probably been researching the different laws, property exemptions, chapters of bankruptcy and pre-bankruptcy planning strategies. But when it comes to actually pulling it off, the bankruptcy process can be intimidating to someone without experience. Just filling out the requisite bankruptcy petition and numerous schedules can be a daunting task without expert advice and guidance. Furthermore, a misstep in the process can lead to the dismissal of an otherwise legitimate bankruptcy case.
So where can someone turn to get help and ensure their case is handled correctly? While only a bankruptcy attorney can offer legal advice, there are "consultants" that offer petition preparation services. In almost all bankruptcy cases though, the petitioner is better of choosing between an attorney, or completing the process of filing bankruptcy pro se.
Here are the ups and downs of each option:
Bankruptcy "Consultants" or Petition Preparers
Petition preparation services are not new, but their practices have come under fire recently by the US Bankruptcy courts due to their "advising" clients on bankruptcy strategies. In many cases, their clients are steered into poor decisions that wind up costing them in the long run.
It is for this reason that many such bankruptcy consultants have been shut down and charged with practicing law without a license. Unfortunately for the clients that suffered the consequences, many had important rights lost due to the bankruptcy consultants advice.
The fact is this: A Bankruptcy "Consultant" or petition preparation service can do only one thing, and that's fill out paperwork based on information provided by the petitioner. Any more than that is illegal.
The US Bankruptcy Court issued the following statement regarding petition preparers and filing bankruptcy:
"Beware of bankruptcy petition preparers who do not comply with all legal requirements. The role of non-attorney petition preparers is solely to type information on Bankruptcy Forms. Petition preparers are barred by law from providing legal advice - they cannot explain how to answer legal questions or assist in bankruptcy court. Petition preparers must sign all documents they prepare; print their name, address, and social security number on such documents; and furnish copies to the debtor. They cannot sign a document on the debtor's behalf or receive payment from the debtor for court fees."
"It is very important that a bankruptcy case be filed and handled correctly. The rules are very technical, and a misstep may affect a debtor's rights. For example, a debtor whose case is dismissed for failure to file a required document, such as a credit counseling certificate, may lose the right to file another case or lose protections in a later case, including the benefit of the automatic stay. Bankruptcy has long-term financial and legal consequences - hiring a competent attorney is strongly recommended."
As a general rule, anyone considering bankruptcy should avoid using a petition preparation service, or "bankruptcy consultant" unless they need help with English translation of the documents.
Filing "Pro Se"
While more than 90% of petitioners file with the aid of an attorney, it is possible to file bankruptcy "pro se", that is, by representing yourself. For simple chapter 7 cases where the debtor owns no property or assets of any value, filing without an attorney is a reasonable way to avoid some of the costs of filing bankruptcy.
A lot of help and legal advice when filing pro se can be found online with regards to completing the bankruptcy paperwork. We have put together a comprehensive page on filing chapter 7 bankruptcy without a lawyer. It should be a great resource for anyone wanting to complete the process on their own.
In cases where there is real estate, cars or other valuable property that the debtor wishes to protect from the bankruptcy estate, then it's probably wise to have an attorney handle the case. (See also reasons why you should never represent yourself in a bankruptcy case).
Using a Bankruptcy Attorney
The vast majority of bankruptcy petitioners will end up hiring an attorney before they actually file their case, and for good reason. An experienced bankruptcy attorney has a lot to offer his or her clients. Just knowing that the case is being handled properly by an experienced attorney can offer already distraught debtors some piece of mind.
More importantly, an attorney can ensure their clients do not lose any property that can be saved, and that all possible debts are eliminated. Creditors will often motion for the court to remove their claims from the bankruptcy, and without legal representation, most people are unsure how to rebut these motions and may end up owing money on a claim that otherwise should have been discharged.
While an attorney will cost anywhere between $1,200 and $2,000, this is easily justified by the relief provided by a smooth and successful bankruptcy case. If you are considering bankruptcy as an option to get out from under insurmountable debt, Talk to a Bankruptcy Lawyer to find out how to use the Bankruptcy Court to eliminate debts and get a fresh start.
