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The Perils of Filing a Pro Se Bankruptcy Petition – Part 2

This is a follow-up to a previous article that identified many of the pitfalls that confront a debtor who files for bankruptcy without the aid of an attorney.  Specifically, that article addressed the main reasons why such debtors would not receive a discharge of their debts, or would lose assets.  This article will address issues that may arise after a case is discharged, assuming that the debtor successfully navigated the obstacles that would have led to a dismissal.

1)      If a lawsuit was pending at the time the case was filed, almost all pro se filers fail to file the necessary documents in the court in which the debt collection lawsuit is pending.  While the suing creditor may be notified, this does not mean that the lawsuit will automatically be removed from the state court calendar.

2)      A bankruptcy discharge does not automatically eliminate any judgment liens which may have been asserted against the debtor’s real estate.  While the debt may be discharged, a judgment lien will remain against the debtor’s real estate.  This will present a problem if the debtor ever sells, transfer or refinances the property.  In order to eliminate such liens, a specific motion must be filed during the bankruptcy cases.  Many pro se filers are unaware of the additional steps that need to be taken to successfully “avoid” such a lien so that their property is no longer impaired.

3)      If a Chapter 7 debtor had a secured debt that they wished to keep, such as a house or an automobile, then the lender will require that the debt be “reaffirmed”.  If a debt is not reaffirmed while the bankruptcy case is pending, the debtor could risk the repossession or foreclosure of their collateral even if the payments are current.  Even if the creditor does not choose to repossess/foreclose due to the debtor’s failure to reaffirm the debt, most lenders will not report post-discharge payments on the debtor’s credit report if the debt was not reaffirmed.

4)      On the other hand, an unwitting debtor may reaffirm on a debt that had no collateral, or would not have required a reaffirmation agreement, because they were unaware of their rights.  Additionally, the debtor will not know how and when to cancel such a reaffirmation agreement if they change their mind.

5)      In some cases, a creditor may have filed an objection to the discharge of their particular debt.  If the debtor did not timely respond to that objection, or otherwise defend against it, then they will discover that they are still liable for that particular debt, and will face the same collection activity as they did before the case was filed.

6)      Even though the case is discharged, a Chapter 7 bankruptcy trustee may still be in the processing of selling or liquidating any assets that were not properly disclosed or exempted.  Many pro se debtors operate under the assumption that the bankruptcy discharge brings their case to a close, and that the trustee’s supervision of their assets ends at that time.

The issues identified here may not exist in some pro se cases.  However, if you have been sued on a debt, own land, or have secured debts that you wish to keep, it is highly recommended that you seek representation from a bankruptcy attorney.  This will not only enable the debtor to successfully receive their discharge, but will also provide protection against surprises years after the case has been completed.