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Couple looking doubtful

Refer to the Bankruptcy Network. Chapter 7 is the form of bankruptcy where you surrender all assets and are relieved of all debts. Some people may think that they don’t have much to lose, so they might as well try to fill out the forms themselves with an attorney. That is probably not a really great idea.

As the Official Instructions to the bankruptcy forms state, “Completing the forms is only a part of the bankruptcy process. You are strongly encouraged to hire a qualified attorney not only to help you complete the forms but also to give you general advice about bankruptcy and to represent you in your bankruptcy case.”

So what’s the worst that can happen if you don’t use a lawyer? Lots.

1. You can lose your home. Many pro se (without a lawyer) filers are unfamiliar with the exemption laws under which some or all of the equity in your home might be able to be protected. The exemption laws vary tremendously from state to state; what is fully protected in one might be totally unprotected right across the state line. The timing of the filing may affect what exemptions are available. If there’s unprotected equity, the Chapter 7 Trustee might sell your home to pay some or all of your creditors (and take a commission on the distribution).

How your home is titled can also affect things. If it’s owned by you and your spouse, and you have no joint debt (other than the mortgage or a car loan), some states might protect your home regardless of how much equity there is in it. But some don’t. Most pro se filers don’t understand how the way in which a home is titled can impact whether the Chapter 7 Trustee might be interested in selling it.

A good bankruptcy attorney can review your situation and let you know whether there is any significant risk to your home if you file.

2. Fraudulent Conveyances. Some people think that giving away or selling property for a lot less than it’s worth just before filing bankruptcy is a good way to avoid its liquidation by a Ch 7 Trustee. It’s not. Called “fraudulent conveyances,” doing this could not only result in your being denied a bankruptcy discharge, it could end up with you serving jail time for bankruptcy fraud.

A good bankruptcy attorney can review your situation and let you know how to protect assets you don’t want to lose (and avoid fraudulent conveyance issues).

3. You can lose your claims. If you don’t schedule personal injury or medical malpractice claims, breach of contract claims, consumer protection violations, and other potential claims you might have (even if you don’t then plan on bringing them), you can lose them, no matter how strong a case you have. The concept of “judicial estoppel” could prevent you from even bringing the case if you didn’t disclose it in the bankruptcy.

A good bankruptcy attorney can make sure that your right to bring your claims is protected.

4. Don’t Schedule All Your Assets? You Can Lose Them. You are required to schedule ALL of your assets and ALL of your debts. An asset is anything you own, possess, or have any legal interest in. Your home with the big mortgage isn’t “owned by the bank”–it’s owned by you. The bank has a lien against it. And you’re required to schedule it. If you don’t, not only might your discharge be denied, you could end up serving jail time for bankruptcy fraud.

Note that just because an asset is scheduled doesn’t mean that you will lose it. You may be able to exempt it, it may not be part of the bankruptcy estate, or the Trustee can abandon it. The vast majority of my Chapter 7 clients keep everything they have.

A good bankruptcy attorney can make sure that your assets are properly scheduled and protected.

5. Preference Payments. Paying back loans to family and friends during the year before your case is filed is a great way to get them sued for a “preference”. Of course, you paid mom back before you paid Capital One. But if the payment is considered “preferential,” the Chapter 7 Trustee can sue mom to get that money back. There are some defenses to preference actions, but you need to know them and make them timely or they could be waived.

A good bankruptcy attorney can make sure that your case is timed so as to avoid preference actions.

A good bankruptcy attorney can make your Chapter 7 case easy. Handling it without one often makes it hard and can make it very, very painful (and expensive).

Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida. For more information, go to our web site or call 727-335-7151.