• Home
  • Bankruptcy in Brief
  • ABC’s of Bankruptcy
  • Considering Bankruptcy
  • True Stories
  • Chapter 13
  • Blog
  • About
  • TOC

Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box
  • How bankruptcy works
  • Mortgage Matters
  • Consumer Rights
  • You & Your Lawyer
  • Small Business
  • Family Law

Bankruptcy No Place For DIY

By Cathy Moran

price tag public domainThe do- it- yourself spirit seems especially strong in bankruptcy courts these days.

Only it often comes with a big price tag.

Nearly 45% of the Central District CA Chapter 7 cases were filed by individuals doing it themselves.  The national rules committee drafted the new bankruptcy forms with the unrepresented in mind.

Why do people take such a momentous step as filing bankruptcy without an attorney?

They go it alone, without a lawyer, for three reasons:

  1. They assume they can’t afford a lawyer.
  2. They assume that there are no consequences for doing it badly.
  3. They assume it’s “just filing out forms”.
All of these assumptions are wrong.  But let’s look at the third assumption, that it’s “just filling out forms”.

What bankruptcy filing entails

Southern California bankruptcy lawyer Jay Fleischman outlined the steps in a bankruptcy case.  Each of those decisions is one a pro per ( a person representing themselves in court) has to make  to file their own bankruptcy case.

It’s a pretty daunting list.

You have to

  • decide if bankruptcy is the best choice;
  • choose a chapter;
  • list all your tangible and intangible assets and your property transfers
  • get the right credit counseling

An industry has sprung up to “serve” those bankruptcy filers who don’t want to do it entirely alone, but think they don’t need, or can’t afford a bankruptcy lawyer.  They’re called petition preparers.

Enter the petition preparer

It takes no training or competence to hang out a shingle as a petition preparer.  Anyone can call themselves a bankruptcy petition preparer.

A petition preparer is supposed to do nothing but type up the information provided by the debtor.  They are not supposed to explain the forms or the choices those forms require.  To do more than type is the unauthorized practice of law.

The wide spread harm that untrained preparers caused to their customers triggered special provisions in the 2005 bankruptcy “reform” law.  At least now they have to disclose their involvement in drafting the bankruptcy schedules.

Special local rules limit what a preparer can charge and require that they identify themselves on the cases they handle or, more often, mishandle.

Sometimes, to avoid exposure, they coach their clients to lie about their involvement in the case.

Just for the record:  lying in a bankruptcy case is never a good thing.

Exposed in public

So I get a  really mixed feeling when  a debtor appears at a 341 meeting in Oakland without a lawyer.

What happens when you go to court for bankruptcy

The trustees there ask the debtor to turn to Schedule C, read the code sections from the California Code of Civil Procedure  beside each asset they’ve claimed exempt and tell him how they chose that exemption.

The trustee usually gets a blank stare or some confused stammering.  The debtor has no idea how to answer.

Most people who have filed bankruptcy are scared to death about the first meeting of creditors anyway.  But this question from the trustee is designed to flush out the fact that either, the debtor had “help” with their petition that wasn’t disclosed, or that the preparer did more than they are legally allowed to.

The preparer obviously told the debtor what exemption choices there were, and selected exemptions for the client.

This scene is particularly painful, since badly done exemptions may cause unrecoverable damage to the debtor.

While it’s the petition preparer who has broken the law, it’s the debtor who may pay for the bad advice.

My advice:  confine your do-it-yourself inclinations to craft projects.  Get competent legal help before filing bankruptcy.

Without a lawyer you may find you can’t get out of bankruptcy, no matter the cost of remaining.

More

Botch your bankruptcy and lose your house

Questions to ask a bankruptcy lawyer

What should bankruptcy cost

Should you wait to file bankruptcy

 

Image courtesy of  Crisg and OpenClipArt

More from the Soapbox

  • Two Strikes & You’re Out (Of Your Home)Two Strikes & You’re Out (Of Your Home)
  • 2019 Reader Favorites From Bankruptcy Soapbox2019 Reader Favorites From Bankruptcy Soapbox
  • Bankruptcy Alphabet:  X is for oeXBankruptcy Alphabet: X is for oeX
  • Miracles Possible in Mortgage MessMiracles Possible in Mortgage Mess
  • Ten Debts That Follow You After BankruptcyTen Debts That Follow You After Bankruptcy

Filed Under: Consumer Rights, You & your lawyer Tagged With: do it yourself

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

Comments

  1. carlos lacy says

    January 4, 2013 at 8:02 pm

    This is great article and I absolutely agree with this. These are really true and people doing these should realize that the DIY strategy just worsens everything.

Bankruptcy Basics

About The Soapbox

You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

How Bankruptcy Works

What Happens To Your Bank Account in Chapter 13

Those considering filing a Chapter 13 bankruptcy worry about "what happens to my bank account?" Will the trustee take all the money? How do I pay my living expenses after I file? The short answer is: nothing changes. The account remains yours and available for all the expenses of day to day living. Because, … Read more

More Posts from this Category

643 Bair Island Road
Suite 403
Redwood City, CA 94063
Phone: (650) 694-4700
Phone: (650) 368-4700

Categories

All content copyright © Moran Law Group. All rights reserved.