Less than 1% of people who try to file Chapter 13 on their own will manage to get a discharge. Less than half of people who try to file Chapter 7 on their own see their cases discharged.
This is because bankruptcy cases are a lot more complex than people believe them to be, and a lot can go wrong if you don’t have an experienced attorney to guide you.
Filing the Wrong Type of Bankruptcy
There’s no such thing as “personal preference” when choosing a bankruptcy chapter. It’s a legal and strategic decision. It’s based in part on your means, in part on your goals, and in part due to the laws governing bankruptcy.
For example, you may want to file Chapter 7 bankruptcy but be unable to because a federal means test disqualifies you from doing so. If you try to file Chapter 7 without passing the means test then you won’t be successful no matter how hard you try.
You may want to file Chapter 13 to preserve your house and car, but if your income doesn’t allow you to craft a plan that will give your creditors at least as much as they might have gotten had they forced you to liquidate, they may demand that the courts convert your case to a Chapter 7 instead.
Working with a qualified bankruptcy attorney ensures you have the right type of case from Day 1.
Making Mistakes on Asset and Debt Reports
Most people don’t set out to lie on asset and debt reports, but they make major mistakes and errors that the courts then interpret as dishonesty. When this happens there are a range of consequences that can include case dismissal or even charges of bankruptcy fraud.
A bankruptcy attorney is trained to help you think of and find very potential debt or asset that needs to be included on your paperwork, and can make changes and amendments on your behalf if you later discover a mistake.
Failing to Account for Property Transfers, Purchases, and Otherwise Innocent Financial Moves
Many borrowers make a lot of mistakes while trying to manage their financial situation, and they do it with the best intentions in the world. They race to pay family members or friends while letting other debts pile up, long before they think about filing. They sell their house in a panic.
Some are in denial for a long time, and run up credit cards before they finally realize they’re in danger.
When you work with an attorney you can account for all of these moves, choosing the right time to file bankruptcy and getting your affairs in order before you try. This helps to circumvent many of the major problems that arise when you file.
Being Unable to Meet Creditor Objections
Creditors will raise them, especially if you owe a lot of money. This is especially true if they have reason to suspect you took out a loan under false pretenses. For example, many people “fudge” their income on credit card applications. Credit card companies pull those applications back out at bankruptcy time and use them to raise objections to discharging their debts.
Your attorney can help you manage these objections. On your own, facing down an army of corporate lawyers, you’re unlikely to fare quite so well.
Failing to Create a Plan the Trustee Will Accept
There are quite a few tests that a plan must pass before a trustee will accept it. One is the disposable income test. In most cases, all of your disposable income goes to your creditors. Your attorney can help you demonstrate what is and isn’t disposable.
Your plan must also satisfy the “best interest of creditors test” as mentioned above: it must pay as much as your creditors would have received under a Chapter 7 bankruptcy.
There are other instances in which the trustee may suspect your plan isn’t being presented in good faith, and they may object on those grounds. Your attorney helps you create a workable plan, and defend the plan you suggest.
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