Do You Need a Bankruptcy Attorney?

By: Aaron Huff

You’re filing bankruptcy, why would you want to hire an attorney?  They charge a lot of money, right!?!?  These are words that I overheard at a Chapter 7 341 Meeting of Creditors almost a year ago.  They were uttered by a “pro se” filing debtor (someone who filed to represent themselves).  This was in response to the Trustee asking if they would want to continue the meeting in order to find an attorney to review what they had prepared, etc.  The Trustee advised them that they would be held to the level of a competent bankruptcy attorney if they insisted on continuing forward.  The individual insisted on continuing.  They had spoken with a neighbor who had just filed and “copied” their petition and were sure they’d done it “right”, and not to worry, they’d filed a bankruptcy with an attorney before so they knew what to expect.

Pro Se Horror Story

What followed was the most horrific thing that any person sitting in the room who’d filed a bankruptcy could witness out of a 341 Meeting.  It was bad enough that I had to calm my own client down (who’d started crying at one point wondering if he’d just lost everything).  The Trustee advised that he was aware of the prior filing.  It just so happened that the individual had filed another Chapter 7 bankruptcy 7 years ago.  Had the person used an experienced attorney, they would have learned that they were ineligible for a discharge in a Chapter 7 bankruptcy as 8 years had not elapsed.  They would’ve learned that a Chapter 13 bankruptcy would’ve been an effective filing if they were pressed, otherwise, they could wait out one more year and file a Chapter 7.  So, strike one is that it’s a worthless filing that will afford no discharge.  Up next?  They did not apply exemptions to their property, including two vehicles that they had valued several thousands of dollars.  Strike two.  The Trustee asked for the keys to the vehicles.  The third strike?  They also failed to apply exemptions to a tax refund that they had disclosed as having been recently received for several thousand dollars…the Trustee ordered them to pay it over to him to be disbursed to creditors.

Filing Pro Se Can Put Your Property in Jeopardy

As the meeting ended, this person lost two cars, lost several thousand dollars in a tax refund and they weren’t even going to get a discharge!  The debts they owed would still have the ability to collect on the amounts not paid by the property taken by the Trustee.  To save a little money on an attorney, they cost themselves thousands and gained no benefit.  It was quite amazing to see such a thing happen….and it’s not a rare occurence!  People in a financial bind will oftentimes panic.  They view the attorney as an expense that they don’t even want to think about.  This is a terrible move in that most (if not all) attorneys practicing heavily in bankruptcy will offer a no-cost consultation and many, like myself, will work with individuals on the fees required to file.  Filing a bankruptcy without an experienced attorney can prove disastrous.

The Bankruptcy Code is Complex

The situation I mentioned above is, unfortunately, quite common.  The Bankruptcy Code is very complex.  Furthermore, the procedures involved with filing bankruptcy are their own animal.  Many attorneys even stay away from bankruptcy practice because of the steep learning curve.  Filing a case on your own, or shopping for the “cheapest” option, can prove more costly than going to someone who has experience with bankruptcy.  You get what you pay for.

A Note About Bankruptcy “Petition Preparers”

The same thing applies to “petition preparers.”  Recently, there has been a surge in bankruptcy cases filed in Northern Kentucky by some “petition preparers.”  I have seen firsthand the quality of work generated.  For a couple hundred dollars, several people have taken a gigantic risk in filing their bankruptcy with these preparers only to find a case generated that has incorrectly applied exemptions, significant omissions of property, and various other problems for those filing.  In one instance, the only thing saving the property of a potential debtor from being taken was the failure to pay the filing fees by the “preparers.”  I was amazed at the risk taken in the name of saving a relatively small amount in fees.  Once again, you pay for what you get.  Unfortunately, on the back end of these cases, the cost can be quite large…all due to poor case preparation and advice.  It is worth the investment to hire an attorney to give the best representation possible.

If you are thinking of filing a bankruptcy, find an attorney.   Most attorneys offer a free consultation to discuss what chapter of bankruptcy is advisable for you.  At the very least you will leave with the knowledge of what will best help you and a plan for gathering the fees needed to file.  Failing to do so could be more costly for you.