If you file for bankruptcy without a lawyer, you can usually get most of the way to the finish line. Unfortunately, “almost” is good enough only in horseshoes and hand grenades – not in bankruptcy.
For a layman filing a Chapter 13 case without a lawyer, he didn’t do too badly.
He got credit counseling and filed the certificate.
He completed the schedules fairly well.
He even filed a pro se adversary proceeding to enforce the automatic stay when the foreclosure on a multi million dollar property went forward despite the bankruptcy.
But the one thing he didn’t know and didn’t provide for was an extension of the automatic stay.
Turns out, he’d filed another bankruptcy case within the 12 months prior to the present case. That case had been dismissed.
So, the automatic stay, one of the defining features of bankruptcy relief, expired 30 days after his case was filed.
The bank is now free to foreclose on his house without seeking the consent of the bankruptcy court.
The Vanishing Bankruptcy Stay
He came so close to getting it right and saving the money a bankruptcy lawyer would have cost.
But an overdeveloped sense of confidence and bankruptcy “reform” bit him instead.
Stopping repeat bankruptcy filings was a goal of the 2005 bankruptcy amendments. Section 362 was altered to provide that in cases where the debtor had a prior case pending within a year of the present case, the stay only lasted 30 days unless the debtor moved the court to extend it.
If there were two cases, pending and dismissed, in the prior twelve months, a bankruptcy filing brought with it no stay at all. The debtor had to proactively petition the court for a stay. And essentially argue why they should get a third bite at this apple.
Beware The Simplicity Of The Bankruptcy Forms
One take-away from this man’s experience is that success in other professional fields, and the fact a bankruptcy case is filed using preprinted forms, does not mean that you can fill out the forms and become an effective bankruptcy lawyer.
While the forms in this man’s case asked about prior bankruptcy filings, nothing in the forms told him what the consequences were of having a prior case that was dismissed.
Official bankruptcy forms are just the beginning of a case.
Traps Abound
A second lesson here is that the Bankruptcy Code since 2005 is strewn with man-traps and quick sand that was deliberately added to the code by Congress to force the automatic dismissal of bankruptcy cases. The vanishing automatic stay is just one of them. Just like the old pitch that you can’t tell the players without a program, you can’t count on navigating a bankruptcy case on your own just because you found a set of forms.
The third point recalls another old saw: penny wise and pound foolish. This case included two multi million dollar properties. The fee for a bankruptcy lawyer to handle the case probably amounted to $2000. By filing without a lawyer and saving that $2000 attorney fee, both properties are in jeopardy.
Just because the law lets you serve as your own lawyer doesn’t make it a good idea. The more that is at stake in your financial life, the more important it is to get experienced bankruptcy counsel.
Cathy Moran helps individuals and small businesses in Silicon Valley with their bankruptcy issues. She can often be found on Google+ and on Consumer Ledger, where she shares information about consumer protection issues and personal finance.
Image courtesy of Flickr and cdedbdme