6 Reasons Not to Attempt Bankruptcy On Your Own

Many people considering bankruptcy want to file on their own for one reason: they don’t feel like they can afford to hire an attorney. That’s understandable. Someone considering bankruptcy is obviously struggling financially, and an extra expense is the last thing they’re looking for. Unfortunately, trying to file bankruptcy alone can backfire and end up costing much more in the long run.

At Borowitz & Clark, we know from experience how important it is for people filing bankruptcy in Los Angeles to have reliable advice and assistance. That’s why we offer free consultations to people looking to solve debt problems in and around Los Angeles, and why we offer payment plans to make legal assistance more accessible.

Reasons Not to Attempt Bankruptcy On Your Own

Pitfalls of Filing Bankruptcy Without an Attorney

The overarching reason it’s generally better to hire an experienced Los Angeles bankruptcy attorney is that the bankruptcy success rate is much higher in cases where the debtor is represented by an attorney. The most recent pro se report from the U.S. Bankruptcy Court for the Central District of California showed that just 55.6% of Chapter 7 petitioners who filed without assistance received a discharge in their bankruptcy cases. 94.1% of those filing with a bankruptcy lawyer received a discharge.

Outcomes are even worse for Chapter 13 filers who try to go it alone. According to the American Bankruptcy Institute, less than 3% of Chapter 13 cases filed without legal assistance are successful. The specific risks of filing bankruptcy on your own include:

1. Choosing the wrong type of bankruptcy.

While Chapter 7, with its shorter timeline and the ability to discharge most unsecured debt, is more appealing to most people considering bankruptcy, it’s not right for everyone. Chapter 7 generally won’t help resolve secured debts like mortgage loans, and if you have non-exempt assets you could lose property in bankruptcy.

You’ll need a thorough understanding of how each type of bankruptcy works and how your property, and debts, are classified under bankruptcy law to make the right decision. An experienced bankruptcy lawyer can explain the differences between the two types of bankruptcy cases in detail, and assess your debts and assets to determine which will serve you best.

2. Choosing the wrong exemptions.

Bankruptcy exemptions protect certain property from your creditors in bankruptcy. California offers two different sets of exemptions to allow people to protect the property that matters most to them. But each is a give and take. For example, the set of exemptions that protects more equity in your home offers no wild card exemption.

Choosing the wrong set of exemptions could leave assets you want to keep unprotected. Your Los Angeles bankruptcy lawyer can help ensure that you choose the exemptions that best protect the property you value most, and that there aren’t any unpleasant surprises.

3. Oversights and technical errors.

You may have heard that filing bankruptcy is “just filling out forms,” but it’s actually more complicated. Those forms themselves run to several dozen pages, and it’s up to you to know which category each debt and asset belongs in, how to assign a value, and even which specific provision of the law allows you to exempt a particular item.

Honest mistakes could delay your bankruptcy, cost you property, or even get your case dismissed. A lawyer who has thorough knowledge of bankruptcy law and procedures can protect you against those pitfalls.

4. Mistakes you make before filing or filing too soon.

The U.S. Bankruptcy Code contains several rules and restrictions for people about to file bankruptcy. For example, you’re not allowed to give away property or sell property for below market value leading up to bankruptcy, since that could cheat creditors out of assets that could be used to repay them. Similarly, you can’t choose to pay off one creditor at the expense of others–especially if the one you choose to pay is an “insider” like a family member or business partner. In addition, you can’t take out new credit in anticipation of bankruptcy.

Making one or more of these mistakes before bankruptcy can result in dismissal, or even more serious sanctions.

5. Being unprepared for creditor challenges.

Creditors have an opportunity to appear at your 341 hearing and ask you questions, and to file objections to the discharge of certain debts, your Chapter 13 bankruptcy plan, or even your overall right to a bankruptcy discharge. These proceedings are like mini-lawsuits within your bankruptcy case, and may require written responses in a particular format, submission of evidence, or even appearance at a hearing.

When you work with an experienced bankruptcy attorney, your lawyer can prepare you in advance for any likely challenges. If creditors do file objections or other adversary proceedings, it’s to your advantage to have an attorney who is comfortable litigating those matters and has in-depth knowledge of both the substantive law and the bankruptcy court procedures.

6. Losing future rights.

If you file for bankruptcy on your own and something goes wrong, you can probably file again. But, there are some qualifications. For example, if your case is dismissed because you did something wrong, you won’t get the same benefit of the automatic stay when you refile. In certain circumstances, you may even be barred from refiling for a period of time.

Even if you are able to refile right away, you may lose property due to the lapse between bankruptcy cases. The automatic stay will be lifted when the case is dismissed, which means creditors can go straight back to pursuing collection actions. Working with an experienced bankruptcy lawyer from the start can help avoid setbacks and preserve your rights.

Talk to a Los Angeles Bankruptcy Lawyer Today

Bankruptcy can be a powerful tool for rebuilding your financial life. It doesn’t make sense to cut corners and risk having your case dismissed or losing some of the benefits of bankruptcy. At Borowitz & Clark, we’ve helped tens of thousands of people make the most of the bankruptcy process. To learn more about how we can help you, call 877-439-9717 or fill out the contact form on this site.

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