About 45% of Chapter 7 bankruptcy cases filed in Los Angeles are pro se, meaning that they’re done without a lawyer. New York sees fewer Chapter 7 cases filed without an attorney, but some folks still do it.
For the most part, the people who are filing for bankruptcy without a lawyer are using some sort of paralegal or typing service but we all know they’re not allowed to give legal advice. In fact, all those folks can do is type up the forms and charge a maximum of $200 for the service.
What that means is that, aside from typing, your need to know a few things in order to file Chapter 7 bankruptcy without a lawyer. Though I’m a bankruptcy lawyer, I thought it would be a good idea to give you the steps you need to take in order to file your Chapter 7 bankruptcy case without the assistance of an attorney. After all, lots of people can’t afford the money to hire an attorney for a Chapter 7 bankruptcy.
You’ll likely want to print this out and keep it by your side – so you don’t make any mistakes.
Do A Side-by-Side Comparison Of Chapter 7 and Chapter 13
How do you know Chapter 7 bankruptcy is the right move for you? Depending on your income, assets, debts and a host of other considerations … it may be a horrible idea. You’re going to need to do a side-by-side comparison of Chapter 7 and Chapter 13 to see which one will give you the best outcome. Dive deep enough to analyze the situation properly, because making a mistake could spell big trouble.
Analyze Your Debts
Look at your debts to see whether they’d get discharged in a Chapter 7 bankruptcy. Some debts will be wiped out at the end of the case, others survive. Various debts may be discharged depending on the circumstances of the liability – taxes come to mind. Be sure to review your federal and state tax transcripts so you know for sure whether they qualify for discharge. There are some other debt factors to consider as well.
You may want to run a credit report while you’re at it; this will help you uncover those debts you’ve forgotten due to age. It will also show any judgments that may be outstanding against you. Those judgments may, depending on where you live, be considered to be liens against real estate or other assets; if so, make a note so that you can make the appropriate motions in bankruptcy court to jettison those liens.
Review Your Assets And Choose Exemptions
You already know that you need to disclose all of you assets, even the ones that are in your name but being used by other people. Though it’s true that you can keep many types of personal property when you file for Chapter 7 bankruptcy, you’ve got to be sure to exempt those assets properly. California’s difficult for some people because there are two types of exemptions to choose; in New York you can choose either the federal exemptions or the state scheme. If you pick the wrong exemption scheme, you’re going to end up losing something you might have otherwise been able to keep.
As to real estate, I’m sure you recognize that this is tricky. You’ll need to get a proper valuation and ensure that you can exempt the full value of the equity before walking into Chapter 7 bankruptcy.
Tally Up Your Income And Expenses
You’re going to need to review your income over the past six months and plug the figures into the means test, if only to see if your household income is above or below median. If you’re above median income then you must remember to do the means test calculations, taking care to include all relevant income and backing out every possible deduction to determine whether you can file Chapter 7 bankruptcy.
Regardless of whether you’re above median or below, spend the time needed to complete your income and expense schedules. The analysis is not only necessary for the schedules, but also to see if you’re at risk of a motion to dismiss your bankruptcy case for abuse.
Check Out Leases And Other Executory Contracts
In a Chapter 7 bankruptcy, your leases become the property of the trustee. If you rent an apartment or house at below-market value (New York City residents, think about that rent-stabilized lease) you need to determine the chances of the trustee taking it over and forcing you out of your apartment.
Review Your History
If you’ve been making payments on your debts – credit cards, student loans, even personal debts you owed to family and friends – you’ll need to review the timing of your bankruptcy petition. Some of those payments made be considered to be preferences, so make sure you disclose properly.
Asset transfers, bank account shuffling, property losses and lawsuits also need to be disclosed so the trustee can determine whether there’s a reason to sue someone and get that property back into your bankruptcy estate. Be thorough and clear with the court at all times.
Check Up On Business Ownership
If you’ve owned a business or an interest in a corporation, LLC, LLP or sole proprietorship in the past then you may need to get your hands on some of those documents as well. Disclosure is the key here, so be sure to follow the rules accordingly.
Read The U.S. Bankruptcy Code And Local Rules
The U.S. Bankruptcy Code governs every bankruptcy case filed in the United States, so you want to be intimately familiar with it – especially Sections 1, 3, 5 and 7. Also hit the local court website and read all the local rules and court orders to ensure that you’re in compliance with forms and procedural requirements. Things like past bankruptcy filings, domestic support ordered and credit counseling requirements are important – ignore them at your own risk.
Drafting Your Petition
Carpenters are known to say, “measure twice, cut once.” So, too, in the world of drafting your Chapter 7 bankruptcy petition and schedules. Whether you use a paralegal service or do it on your own (the forms are on the court website, so doing it on your own isn’t out of the question) you need to be sure to be organized. Schedules of your assets need to be completed, debts need to be categorized and properly listed to ensure full disclosure and compliance with noticing requirements, your Statement of Financial Affairs should be complete, and your means test calculated properly. Make a mistake and you’re sunk.
Not Quite So Easy, Is It?
You’re smart, and good at what you do. Maybe you do your own taxes each year. Maybe you even did a Power of Attorney once. But as you can see, that doesn’t mean you should treat a Chapter 7 bankruptcy as a walk in the park. As of this writing, I’ve been a bankruptcy lawyer for over 16 years yet when I began I had no earthly clue of what to do.
Self-help books abound, and they’re great first steps in understanding the process. Paralegals are allowed to type forms, but they’re not lawyers and aren’t permitted to do more than that.
You’re looking to get out of debt, and are putting yourself into the hands of the U.S. Bankruptcy Court as a way of accomplishing that goal. Don’t you think it’s worth it to hire someone who does this for a living rather than leaving it up to fate and luck?