The Perils of Filing a Pro Se Bankruptcy Petition – Part 1

The Bankruptcy Code does not require that a debtor must hire an attorney to file the bankruptcy petition and represent them in court.  I have noticed lately in Augusta that the number of “pro se” debtors has increased.[i]  Some of these petitions were prepared by the debtors themselves, while others were prepared by an online petition preparation company.[ii]  However, filing without the assistance of an attorney can have disastrous consequences.  This article will address the potential problems that can occur during the case.  The second article will address post-bankruptcy issues which commonly arise due to errors or omissions by pro se debtors.

Easily the most common mistake that I witness with pro se filers in the Augusta area is the failure to obtain credit counseling prior to filing.  Many pro se debtors are in an emergency to file their cases, and overlook this requirement, or incorrectly believe that the credit counselling can be obtained after the case is filed.  In some instances they may believe that they have satisfied the credit counseling requirement, only to discover letter that it was not obtained from an approved agency, or that there were defects in their certificate.  Unfortunately, there are only a few strict exceptions to this requirement, and most cases filed in the Augusta Division without the appropriate credit counseling are dismissed.

One of the fundamental components of a consultation with a bankruptcy lawyers is to disclose all of your assets so that the attorney can advise you as to how that they can be protected.  Georgia law offers specific exemptions for real estate, motor vehicles, retirement plans and other assets.  Unfortunately, many pro se debtors fail to correctly disclose all of their assets to the bankruptcy court.  If the assets are not disclosed, they cannot be exempted.  This means that a bankruptcy trustee could take and sell those assets for the benefit of your creditors.  Even if an asset is disclosed, the debtor has to identify the appropriate section of the Georgia Code which allows for the exemption.  While the debtor may have used the services of an online bankruptcy petition preparer, those companies are prohibited from giving legal advice, which includes the scheduling of exemptions.  At worst, the pro se debtor could lose an asset that they would otherwise be able to protect.  The best case scenario is that they would have to make multiple (but unnecessary) trips to court until the paperwork is in order.

Many pro se debtors are unprepared for their court hearing (known as the “Meeting of Creditors” or “341 Meeting”) and the questions to be asked by the Trustee who presides over the hearing.  The Bankruptcy Trustees in Augusta have specific requirements about information to be provided at or before the court hearing that is in addition to the information already disclosed in the petition.  So even if the petition is correctly prepared, the ability to receive a discharge could be compromised if the pro se debtor is unable to provide tax returns, bank statements and verification of their income to the Trustee.

Pro se debtors also are not prepared to handle creditor objections.  When a creditor objection is filed, the method and manner of the responses are governed by the Federal Rules of Civil Procedure, as well as the Local Rules for the Southern District of Georgia and the Augusta Division.  The failure to timely and accurately file the required documents could result in the loss of a debtor’s rights, such as the ability to discharge that particular debt.  Most creditors will be represented in Bankruptcy Court by an attorney familiar with these rules of pleading.

As indicated previously, there are additional risks common in most pro se cases which may not manifest themselves until long after the case is completed.  The second article will address those consequences, and how the use of a bankruptcy attorney can prevent them.  Keep in mind that most bankruptcy attorneys in the Augusta area – or the outlying counties of Burke, Jefferson and McDuffie – offer a free consultation.  While fees will be charged for the bankruptcy representation, the peace of mind of knowing what to expect and how your case will be handled will be well worth it.[iii]

[i] It has become so prevalent that one of the topics at the April, 2015 Coastal Bankruptcy Law Institute Seminar is devoted to pro se parties in bankruptcy.

[ii] I was recently contacted by an online petition preparation company who was looking for an attorney to represent a debtor for whom they had prepared a petition.  They had charged $2475 just for preparing the petition! The debtors would still be responsible to pay the attorney fees for work done by the attorney after the filing of the case.

[iii] As I have told countless clients over the last 20 years, “I could pull my own tooth if I wanted to, but I would rather pay my dentist to do it.”