Are you struggling with debt you cannot pay and thinking about filing bankruptcy? Perhaps you are concerned that you can’t afford an attorney, and you’d like to represent yourself? Know that it is possible to file bankruptcy without an attorney and receive a discharge of your unsecured debt.
Your jurisdiction’s bankruptcy court website will have all of the forms you need to file and directions on how to complete them, but filing a successful Chapter 7 bankruptcy case requires more than just filling out and submitting forms. This article will give you eight valuable “do’s and don’ts” in representing yourself in a successful Chapter 7 case. These tips will help you avoid common pitfalls and get your unsecured debt discharged in as little as four to six months.
Don’t Fail to Gather Complete Financial Information and Documents.
The most common mistake pro se (meaning, self-represented) Chapter 7 debtors make is failing to do the research necessary to list all of their income, expenses, assets, and debts, as well as all creditors and their contact information, in their filing.
Common omissions include:
- old or inactive bank accounts
- cosigned loans
- belongings that someone borrowed (for example, a bicycle or golf clubs)
- sources of income that are not W2 or 1099 income, such as alimony, annuity, deceased spouse’s pension, reverse mortgage, and others
Bankruptcy is the legislative solution for those “honest but unfortunate” debtors who through no reason of their own cannot pay their unsecured debt. The accuracy of your initial filing establishes your credibility and deservedness with the court and with the Chapter 7 Trustee. If your filing is wrought with errors or omissions and you must file amended schedules. This will damage your credibility and may even require additional fees. Worse, you should know that it is errors and omissions that routinely cause pro se debtors’ cases to be dismissed with no discharge order entered.
Take your time gathering your information and documentation. Obtain your credit reports from the three credit bureaus so that you have information on all of your open accounts as well as accounts in default.
Look online to see if there are any judgments against you or any liens on your real property. Be sure to gather all bills and collections notices, because there may be collectors or attorneys who must be given notice of your bankruptcy filing in addition to the original creditor. Be as thorough as you can to make the best impression upon the Trustee and the court.
Don’t Lie on Your Petition or Schedules.
The last section emphasized the importance of being thoroughly prepared to file as a matter of establishing credibility with the court and the Trustee. This section deals with the consequences of purposefully lying or hiding assets.
Worse than not receiving a discharge is being charged with a federal crime. Under 18 U.S.C. § 157, bankruptcy fraud is a serious federal crime that can be punished by up to five years in federal prison, a fine, or both.
If the Chapter 7 Trustee believes that you tried to deceive the court and take advantage of the bankruptcy process, the Trustee may simply object to discharge, or if the error or omission is egregious enough, may refer your case to the F.B.I for investigation.
Do not put your discharge or your freedom and reputation at risk. Disclose everything and be truthful.
Don’t Pay Back Any Loans or Give Any Personal Belongings Away in the Months Before Your Filing.
If you think you can pay a friend or family member back just before filing bankruptcy so that that loan is not included in your filing, you are wrong. Payments made to one creditor but not to others just before filing bankruptcy are called “preferential transfers” and are forbidden under federal bankruptcy law.
The Trustee will have access to your bank accounts and know what funds are flowing in and out of your accounts, and if they find you made any preferential transfers, they have the power to “clawback” or get back those payments. Not only that but if you did not disclose that preferential transfer in your filing, at best the Trustee will just object to discharge. At worst, the Trustee will refer your case to the F.B.I.
If you’ve given anything away just before filing in order to hide it from the court and the Trustee, that too is a federal crime.
Don’t Charge Up Your Credit Cards Just Before Filing Chapter 7.
If you charge purchases to your credit card in the months just prior to filing Chapter 7 bankruptcy, that is considered “incurring debt in contemplation of filing bankruptcy,” and that debt will not be discharged. This rule is intended to prevent debtors from using their credit card knowing that they cannot pay that debt and knowing that it will be soon discharged in bankruptcy.
Some debtors are using credit cards to survive, purchasing things like groceries and gas. Often a Trustee will not object to that kind of credit card use right before filing. But charging what are considered “luxury purchases,” such as jewelry or collectibles, is a big red flag. Your credit card lender will likely object to dischargeability of this debt, demand that you return the charged items, object to the dischargeability of any of your debt due to fraud, or all three.
Do Disclose All Aspects of Your Financial Situation in Your Filing
Income You List in Your Filing Must Match Income Tax Returns
Any income and deductions you disclose on your federal income tax return for the two years before filing will be accessible to the Chapter 7 trustee, so make sure your bankruptcy schedules align with the information they will find there.
Expenses You List in Your Filing Must Be Reasonable
The expenses you list must be reasonable. If you just leased a 2020 luxury car a few months ago and list an exorbitant lease payment as an expense on your schedules, that will undoubtedly raise the Trustee’s eyebrows. Bankruptcy law does not allow a Chapter 7 debtor to have all of their unsecured debt discharged, yet have enough money each month to treat themselves to a luxury vehicle.
All Assets Must be Listed and Assigned a Value
All assets must be listed with their approximate worth as a used item sold at auction or a yard sale. For example, if a debtor has a three-bedroom, two-bath home filled with ordinary used household furniture, they might list a total of $800 in household furniture and goods. However, if a debtor has valuable fine art, collectibles, or jewelry, those items should be listed separately and an appraisal attached.
Exemptions Keep Assets From Being Seized by the Trustee
A pro se debtor should research what “exemptions” should be used to exempt assets from the bankruptcy estate, meaning, the Trustee cannot seize and sell assets for the benefit of the debtor’s creditors. If you are confused about how to apply for exemptions, consult with an attorney. If you do not and use exemptions improperly, you risk losing assets to the Trustee.
Do Complete the Required Online Courses On Time.
There are two online courses a Chapter 7 debtor must take. The pre-filing course is called the credit counseling course, and the post-filing course is called the debtor education course or the financial management course.
The website of the bankruptcy court for your jurisdiction will have a list of court-approved providers of these courses. Be sure to take them and file the certifications of completion with the bankruptcy court. If you fail to complete both courses or fail to file either certification, your case will be dismissed without a discharge.
Do Respond to Trustee Requests in Full and On Time.
As thorough as you have been in providing the information and documentation required prior to the 341(a) meeting, the Trustee may have additional requests, and you must comply. A Trustee may request documents such as:
- Account balance of a co-signed loan;
- Proof of current address, such as a utility bill;
- Account statements for joint bank accounts or bank accounts that you have control of that are not your own;
- Proof of sale of real property or a car;
- Proof of the necessity of any monthly expense that seems unreasonable.
Be sure to remit whatever material or information is required by the due date and via the communication method preferred by the Trustee (such as email, fax, or regular mail). As a pro se debtor, you want to keep the Trustee on your side and to believe that you filed your Chapter 7 case in good faith. Being open, honest, and responsive help.
Do Retain Copies of All of Your Chapter 7 Paperwork.
There are two reasons to keep a file of all documents generated by your Chapter 7 case.
There are Random Audits of Chapter 7 Cases Nationwide.
If your case is randomly selected for audit by the US Trustee’s Office, you will need immediate access to your case file so that you can appear before the Trustee and answer any and all questions posed to you.
Random audits seldom turn up problems, so don’t be nervous. Be prepared.
If Creditors Try to Collect a Prepetition Debt after Discharge, They are Violating the Discharge Order.
This is important because fines are imposed upon creditors who persist in trying to collect a discharged debt. If a creditor listed in your filing contacts you after your case closes, call an attorney to help you.
Following these eight do’s and don’t will help you succeed in your Chapter 7 filing. However, this article is not legal advice. If you run into problems while preparing your filing or after you’ve filed, consult with an experienced bankruptcy attorney in your jurisdiction. Good luck!
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