The attorneys at Leiden & Leiden have noticed an increase in “pro se” bankruptcy filers in the Augusta Division of the Southern District of Georgia over the last year. Filing a case “pro se” means that the debtor is doing it without the assistance of an attorney. [BANKRUPTCY INTERNET SERVICES – AVOID AT ALL COST!] The Bankruptcy Code does not require that a debtor be represented by an attorney. However, there are many risks to a debtor who tries to save money and file a Chapter 7 [CHAPTER 7] bankruptcy case on their own, including the likelihood of dismissal, or even worse, the loss of assets. [HOW TO LOSE AN ASSET IN BANKRUPTCY COURT WITHOUT EVEN TRYING]
Unlike a pro se Chapter 13 [CHAPTER 13] bankruptcy which is usually filed to prevent a foreclosure or repossession, most of the time that a pro se Chapter 7 case is filed, it is used to stop a lawsuit, judgment or wage garnishment [GARNISHMENT]. What are the most common mistakes for a pro se Chapter 7 debtor in the Augusta area? Here’s the list:
- Not filing a valid credit counseling certificate. The Bankruptcy Code requires that a debtor must have completed credit counseling with an approved agency within 180 days prior to the filing of the bankruptcy case. In the Southern District of Georgia, the certificate has to be dated at least one day prior to the date that the bankruptcy case is filed. You cannot file a bankruptcy on the same day that you have completed credit counseling. Failure to file a valid credit counseling certificate will result in the dismissal of the case, usually within 30 days of the filing date.
- Failure to pay the Chapter 7 filing fee. Unless waived by the court, the fee to file a Chapter 7 case is $338. In most instances, that fee is paid at the time that the case is filed. However, a debtor is permitted to apply for permission to pay the filing fee in installments after the case is filed. A debtor can also request that the fee be waived if the meet certain criteria, but they have to make the request at the time that the case is filed.
- Filing incomplete or inaccurate schedules. Many pro se Chapter 7 debtors file a bare bones or “skeleton” petition and only identify the creditors from whom they want protection, instead of all the creditors that potentially have claims against them. They also fail to accurately disclose their assets, income and expenses. [COMMON MISTAKES WHICH MAY PREVENT EFFECTIVE BANKRUPTCY RELIEF] These deficiencies can lead to the dismissal of the case, or the loss of assets.
- Failing to understand what is considered to be an asset. Many pro se Chapter 7 debtors have a very simplistic understanding of what is considered to be an asset. Usually, they will disclose real estate, vehicles and personal property in their bankruptcy petition. However, an asset can also be a right to receive money, such as an income tax refund. [CONSIDERING BANKRUPTCY AND RECEIVING AN INCOME TAX REFUND? SUGGESTIONS FOR POTENTIAL BANKRUPTCY FILERS] A potential claim against a third-party, such as for a personal injury or workers compensation claim is also considered to be an asset. The right to inherit life insurance or other property from a deceased family member is also considered an asset. Typically, pro se Chapter 7 debtors do not understand what is considered an asset, and what needs to be done to protect it. [ASSETS THAT MANY PEOPLE DON’T REALIZE THAT YOU CAN PROTECT IN A BANKRUPTCY CASE]
- Failure to attend court hearings. Many pro se debtors fail to attend their schedule court hearings, or if they do attend, fail to provide the necessary documents to the Chapter 7 trustee in advance of the hearing. Failure to attend scheduled court hearings, or to provide the necessary documents will eventually result in the dismissal of the case.
- Filing a personal financial management certificate. A pro se debtor not only has to obtain credit counseling within 180 days prior to the filing of their bankruptcy case, but in a Chapter 7 case, they are required to complete a second credit counseling course referred to as a “financial management” course. That course has to be completed and a certificate filed with the court no later than 60 days after the first court hearing. If this is not completed and filed in a timely manner, the Chapter 7 case can be closed without a discharge, leaving the debtor with no further protection from the court.
- Negotiating with secured creditors. The Bankruptcy Code gives Chapter 7 debtors the right to retain collateral and continue to make payments on secured debts. This is referred to as reaffirming on the debt. The debtor also has the right to redeem the collateral for its fair market value or surrender the collateral and eliminate the debt. Most pro se debtors are unaware of these options, and what needs to be done to accomplish them. Pro se debtors also usually fail to take steps to eliminate liens on unprotected debts such as state court judgments.
Unlike pro se Chapter 13 cases, Chapter 7 cases are less likely to be dismissed before the first court hearing. However, the biggest risk in a pro se Chapter 7 case is not the risk of dismissal, but the risk of losing assets that could have otherwise been disclosed and protected if they had sought the assistance of a bankruptcy attorney prior to filing. [SALES, TRANSFERS AND DEBT REPAYMENT: WHAT YOUR BANKRUPTCY ATTORNEY NEEDS TO KNOW] While a pro se Chapter 7 debtor has a better likelihood of receiving a discharge than a similarly situated pro se Chapter 13 debtor, they could actually come out of bankruptcy in a worse position because they fail to appreciate how assets are identified, disclosed and exempted in a Chapter 7 bankruptcy petition. [BANKRUPTCY EXEMPTIONS: WHAT CAN I PROTECT WHEN I FILE MY CHAPTER 7 BANKRUPTCY CASE IN GEORGIA?] The bottom line is that if you are considering a Chapter 7 bankruptcy, you should take advantage of the opportunity to meet with an experienced bankruptcy attorney. At Leiden and Leiden, we offer a free consultation for potential bankruptcy clients. [COMMON QUESTIONS THAT BANKRUPTCY ATTORNEYS HAVE TO ANSWER FOR POTENTIAL CLIENTS]