Are you considering filing bankruptcy pro se (i.e. without a lawyer)? Bankruptcy is perhaps the most common area of law where individuals attempt to navigate court procedures without professional counsel. This is due, of course, to the fact that attorneys cost money—and people who need to file bankruptcy are struggling just to pay their bills.
When you file bankruptcy, you stand to significantly improve your financial situation. But making even the smallest of mistakes or going up against the objections of creditors by yourself can prevent you from maximizing the benefits of bankruptcy and minimizing the risks. Overall, the cost of hiring a lawyer can help you save more money in the long run.
Without further ado, here are 5 mistakes you might make if you file bankruptcy without an attorney.
1. Forgetting to Include Debts on Your Petition
Some types of debts are non-dischargeable, meaning the bankruptcy court will not be able to eliminate what you owe. Child support, alimony, recent tax debts, and criminal penalties are just a few examples of non-dischargeable debts.
Unscheduled debts are also non-dischargeable. Unscheduled simply means you failed to list them on your bankruptcy petition. All your debts are not automatically included in your case, and your situation will not improve as much as it could if you forget to list everything you owe.
2. Hiding Income or Assets
Failing to include all your property and income is perhaps even worse than forgetting to list all your debts. Intentionally shielding funds and assets qualifies as fraud, which may come with serious penalties. One common example of this mistake is when people attempt to protect what they own by gifting it to friends or family members (or selling assets to them for $1 each).
3. Maxing Out Credit Cards Right Before Bankruptcy
If bankruptcy can wipe out your credit card debt, it won’t matter if you spend as much as possible before filing, right?
Unfortunately, this mindset may get you into trouble. Firstly, maxing out credit cards typically means buying luxury items, which you likely will not be able to protect with state or federal bankruptcy exemptions. Secondly, reckless spending immediately before a bankruptcy case may qualify as fraud.
Some people believe they should spend their entire savings or even retirement accounts before filing so they don’t lose the money through liquidation. However, the exemption laws in most states allow you to keep savings, retirement accounts, and similar funds.
This is why speaking with a lawyer well before you actually file bankruptcy will help you immensely. An experienced professional can help you make the right moves in the months leading up to your case.
4. Paying Back Friends or Family Members Right Before Bankruptcy
If you borrowed from friends or family, the bankruptcy court will consider them creditors—just like a mortgage lender or credit card company. When you pay them back before seeking a debt discharge through bankruptcy, therefore, the court may view this as a “preferential transfer.” Treating one creditor better than another (even if they are a close friend or relative) is prohibited.
5. Believing Bankruptcy Myths or Making Assumptions About the Law
In the world of bankruptcy, misinformation is rampant. This is partly because of the societal shame surrounding debt and financial struggle, leading to the misconception that only irresponsible or immoral people file bankruptcy. Without careful research and professional guidance, it can be easy to believe common myths, such as the idea that bankruptcy will strip you of everything you own.
Before making any decisions (from filing bankruptcy to deciding which chapter is right for you), you will greatly benefit from a one-on-one discussion with an experienced attorney. Today, the internet is an incredible resource—but it can never replace individualized attention from a trained professional.
Let’s Get Started on Your Case Today
At Buchalter & Pelphrey Attorneys At Law, we have more than 40 years of experience guiding clients through bankruptcy. We are more than happy to answer all your questions and address each of your concerns. Bankruptcy is a powerful option for those who are struggling with debt, and we can ensure you derive maximum benefits while protecting what matters most. If bankruptcy isn’t right for your situation, we can explore any other options you may have.