Risks of Filing for Bankruptcy Without A Bankruptcy Lawyer: A Comprehensive Guide

by Luke Homen

Many people look into filing for bankruptcy alone before they ultimately decide on hiring a bankruptcy attorney. While this is an option that’s available to you, it comes with significant risks and challenges. Learn more about the risks you accept when you handle your bankruptcy case without legal assistance.

Complex Legal Procedures

Bankruptcy is an incredibly complex legal process. The courts do their best to balance the interests of debtors and creditors, and that means verifying that every single person who receives a discharge actually qualifies for it. You’ll need to fill out extensive forms and documentation to prove that you meet the requirements. Any unclear or inaccurate information could have serious consequences for your case. Bankruptcy law is nuanced and wordy, and laypeople often struggle to understand it without a bankruptcy lawyer’s input.

Lack of Legal Guidance

Legal guidance is essential when you decide to file for bankruptcy. When you choose this route, you must understand your rights, obligations, and options. It’s particularly important that you choose the appropriate chapter for your financial situation. Chapter 7 and Chapter 13 are very different, and choosing the wrong one could wreak havoc on your finances. For example, imagine your income is too high to file for Chapter 7 — but you don’t know that because the requirements aren’t very clear. Filing when you exceed the income limits means that you lose out on filing fees, time and effort spent filling out forms, and other expenses — only to have your application rejected.

But the income limits are actually quite complicated.  There are four different ways to measure your income in a Chapter 7 case: whether you are below “median income,” whether your actual monthly income exceeds your actual monthly expenses (your Schedules I & J), whether your projected income and expenses under IRS standards have an excessive monthly disposable income (your “Means Test”), and whether you qualify for special circumstances after a presumption of abuse.  Any and all of these four approaches to income will be relevant in determining whether you qualify for a Chapter 7 – and you need to know and understand the differences.

Or imagine another scenario: a borrower opts for Chapter 13, which is lengthier and more expensive, because they don’t want to have to sell their assets. Had they spoken to a bankruptcy attorney in Oklahoma, they may have found out that all of their assets would have been exempt in a Chapter 7.

Massive Amounts of Forms and Paperwork

The average Bankruptcy Petition (and supporting initial filing pages) is 70-75 pages long.  The Bankruptcy Petition requires you to list everything you own, all your debts, an income history section, a monthly income section, a monthly expense section, and approximately 8-10 pages of nuanced financial questions, called the Statement of Financial Affairs.  It’s designed to be a comprehensive report of the filer’s entire financial situation, and includes a long list of questions created so that the Debtor will be unable to hide any relevant portion of their financial life.

By hiring a bankruptcy attorney, you won’t need to complete this paperwork alone.  At Convenient Bankruptcy, our law firm completes all the paperwork for you!  We just need you to tell us about your financial situation and then provide us with your financial documents.  We’ll complete a rough draft of the documents, and then review everything line-by-line with you for accuracy.  We won’t file the paperwork unless you’re 100% satisfied that it’s perfect!

Risk of Errors and Omissions

It is all too easy to make critical errors or leave out important information on your bankruptcy paperwork. This paperwork is likely the most thorough you’ll fill out in your lifetime, and if you leave something out, the bankruptcy court will find out about it. When they do, there’s a good chance your case will be dismissed. This ends the automatic stay protecting you from debt collection actions. Working with a bankruptcy attorney gives you peace of mind that these issues are handled appropriately from the beginning.

Inadequate Understanding of Bankruptcy Laws

One of the challenging aspects of bankruptcy law is the need to consider both federal and state laws. While federal laws govern the bankruptcy process, state laws dictate exempt and non-exempt assets. Understanding how and when these laws interact is difficult for a regular person.

Working on your bankruptcy case without a bankruptcy attorney puts you at risk of forgetting critical deadlines or missing legal requirements that may decide the future of your case. The court won’t be particularly concerned about if your non-compliance is willful or caused by inexperience with the law—they may simply dismiss your case regardless.

Challenges in Dealing With Creditors and Trustees

Communication with creditors and trustees can be stressful and time-consuming, especially if you are unfamiliar with the bankruptcy process and your rights. You have a right to be safe from collection attempts during the automatic stay, but creditors do sometimes violate the automatic stay. This is especially true if you owe money to loved ones, small businesses, or customers, all of whom have likely had minimal experience with their role in a bankruptcy case.

If you’re targeted by an aggressive creditor, you need an attorney who will assert your rights and protect you from their illegal actions.

Creditors have also been known to step over the line from time to time. When this happens, it’s hard for someone representing themselves to speak up—after all, you trust the professionals to stay within the limits of the law. Working with a bankruptcy attorney ensures that you never have to call out these behaviors. Your Oklahoma bankruptcy lawyer will handle it for you.

Potential Loss of Property and Assets

Protecting your assets is likely one of your top priorities as you navigate bankruptcy. A bankruptcy attorney is the best way to do so. Those filing on their own have a tendency to unintentionally inflate the value of their assets, which leads to them having non-exempt assets that must be sold off. A bankruptcy lawyer knows how the law requires assets to be valued, and this knowledge can save you from losing assets you could use to rebuild your life after bankruptcy.

Many people significantly overestimate how much they own; this can lead to unnecessary loss of assets. On the other hand, a bankruptcy attorney knows how to use exemptions strategically to maximize the amount you get to keep. The wildcard exemption, which is available in many states, is very helpful when used appropriately. On the other hand, some people claim they have no assets—and that looks suspicious to a trustee. You have to account for everything you own, including clothing, personal items, work items, and home goods—even if they are all exempt.

Increased Stress and Anxiety

It’s no secret that bankruptcy can cause significant stress and anxiety. This is the case even when you have legal representation, but those without legal representation often find the stress to be so overwhelming it keeps them from being able to participate in daily life. Working with a bankruptcy lawyer can do so much for your mental health during this time. Your bankruptcy attorney can explain the routine nature of most bankruptcy proceedings, explain the most likely outcomes to you, and show you that they have a plan if things take an unexpected turn.

Ineffective Debt Relief Strategies

Whether or not bankruptcy is the best choice for you, talking to a lawyer is always a good start. An ethical bankruptcy lawyer won’t want you to pursue bankruptcy if it’s not the right option for you. Meeting with a bankruptcy lawyer gives you better insight into the options available to you and how to learn more about them. Without legal assistance, you could fall for unethical debt settlement schemes that tank your credit without providing relief. You could also get roped into a debt consolidation loan with heavy fees and excessive interest rates. The right lawyer can put you on the right path to a customized solution.

Bankruptcy could be your way out of debt. It can give you room to breathe and the chance to start over. Find out more now—just call us at 405-296-0069 or reach out to us online.