It is rarely a good idea to file bankruptcy without the help of an experienced bankruptcy attorney. Whether you should file for bankruptcy pro se (without an attorney) depends on how complex your case is, and the type of bankruptcy you wish to file.

What Is Bankruptcy?

Bankruptcy is a legal proceeding where a judge and a court trustee examine an individual’s liabilities and assets. They can also analyze the assets, and liabilities of businesses that are unable to pay off their liabilities.

The federal court determines whether to discharge the debts, which means that those who owe sums of money to third parties are no longer legally obligated to pay them. This case may be dismissed by the court if the court has found that the individual or business has sufficient assets to pay off their liabilities.

Bankruptcy laws were put in place to allow people to restart their lives after their financial affairs had collapsed. Whether the collapse was the result of poor decisions or poor judgment, lawmakers may recognize that a second opportunity is an important safety net in a capitalist economy.

The good news for anyone on the fence about filing for bankruptcy is that nearly everyone who does so gets a second chance.

Who Declares Bankruptcy, and Why?

Most businesses and individuals that file for bankruptcy do not have enough money to cover their debts. It is also a financial planning tool if you have sufficient funds to make payments but need to change the terms.

Individuals file for bankruptcy more often than businesses because they often have many kinds of debts. The four most common kinds of debt that individuals have are credit card debt, a mortgage loan, a car loan, and student loans.

When to File for Bankruptcy

To determine whether you should file for bankruptcy, consider carefully whether you can pay off your debts in five years. If this does not seem likely, it may be time to declare insolvency. The bankruptcy law was designed to give bankruptcy filers facing hard times financially a second chance rather than penalize them indefinitely. If you have been financially devastated by a stroke of bad luck and poor decisions, and you cannot see that changing soon, declaring insolvency is your only option.

Even if you do not meet the criteria, you can still expect some debt relief. You can expect to receive help in the form of a debt consolidation loan, a debt management program, or debt settlement. These take approximately three to five years to complete, and none of them guarantee that your debts are paid in full upon completion.

Before filing for bankruptcy, keep in mind that it has long-term implications. It remains on your credit file for 7 to 10 years, making future loan applications extremely difficult.

However, there is a significant benefit both mentally, and emotionally when you are relieved of the burden of debt and receive a fresh start.

Types of Bankruptcy

There are many different types of bankruptcy that you can file. The most common are chapter 7, and chapter 13 bankruptcy.

File for Chapter 7 Bankruptcy Without a Lawyer

Chapter 7 bankruptcy, also known as liquidation bankruptcy, entails liquidating your assets to pay off your debts, which is the best option for those who do not own a property and have a small household income.

Because of state-specific, and federal exemptions, some of your property may be exempt from liquidation when you file for this type of bankruptcy, depending on where you live, and your marital status. Exemptions, whether they are from your retirement accounts, home equity, or other assets such as jewelry, allow you to receive the allowed exemption amounts while the remainder of the proceeds is used to pay off debts.

Before you begin any legal proceedings, consider what you risk losing. If you have valuable property, or real estate, declaring insolvency may pose the risk of losing your valuable assets. There may not be much risk for people who have no significant property, little income, and are burdened with overwhelming debt that they cannot pay.

However, if you have equity in real estate, or if you have vehicles or other personal property that you want to protect, it is advisable to seek legal advice from an attorney. During a free initial consultation, bankruptcy lawyers can often tell you whether you are a candidate. A bankruptcy petition preparer is not permitted by law to provide legal advice.

You could tell the attorney if you want to file Chapter 7 bankruptcy on your own. The important thing is to be truthful so that you can get the help you need. Bankruptcy attorneys should advise you on any foreseeable problems you may have when attempting to file a Chapter 7 bankruptcy on your own. Assuming you have never filed for bankruptcy, and your income is less than the median income for the size of your family, you may not be subjected to the means test.

When filing for bankruptcy without the assistance of an attorney, getting the test form completed correctly can be challenging. If you do not get it right, the United States Trustee’s Office might very well audit or investigate you. They may request additional information, and if they determine you are ineligible based on how you completed the form, they may request that the bankruptcy court dismiss your case.

Completing Chapter 7 Forms Yourself

If you choose to hire an attorney, the attorney completes the forms for you. When filing Chapter 7 bankruptcy on your own, you must obtain, and fill out all the necessary forms yourself. The bankruptcy forms are free and can be downloaded from the United States Courts website. Read through the documents carefully, and fill them out clearly, and correctly. A Chapter 7 bankruptcy petition is made up of several legal papers, and schedules.

Mandatory Chapter 7 Counselling

Everyone who files for Chapter 7 is required to take a credit counseling course. Most of these courses are available online and are reasonably priced. Credit counseling courses typically cost around $25. Some service providers may even lessen or waive the fee.

Before filing your bankruptcy petition for Chapter 7, you must complete the mandatory credit counseling course. Upon completion, you are provided a certificate, which you must then submit to the court. Failure to comply with this requirement could result in the court dismissing your case.

Chapter 13 Bankruptcy

Chapter 13 bankruptcies account for approximately 36 percent of all non-individual filings. In a Chapter 13 bankruptcy, you repay some of your debts to have the remainder forgiven. It is the best option for those who do not want to lose their property, or who do not meet the criteria for Chapter 7 due to a high income.

Individuals can only file for Chapter 13 if their debts do not exceed a predetermined amount. This amount is revised regularly, so consult with an attorney, or credit counselor to find the recent figures. Creating a three-to-five-year repayment plan for your creditors under Chapter 13 is essential. The remaining debts are erased once you complete the repayment plan.

Filing Chapter 11 Bankruptcy

Businesses can submit a petition for chapter 11 bankruptcy. Chapter 11 is also known as reorganization bankruptcy because it allows companies to continue operating while reorganizing their liabilities, and assets to repay creditors.

It is appropriate for any size of business, including partnerships, and, in rare instances, individuals. With permission from the court, businesses can continue to operate while bankruptcy proceedings take place.

How to File for Bankruptcy Without a Lawyer

1. Conduct a Means Test

When filing a petition without a bankruptcy lawyer, the first step is to perform a “Means Test” to see if you meet the criteria for Chapter 7 bankruptcy. A test form is provided by the federal government. You can also find simplified versions of the test online.

While you file bankruptcy, you should be asked about your monthly salary, debts, nonexempt assets, and how many dependents you have. If you have few assets, your household income is less than the state median, and you have not been accused of fraud, the bankruptcy process may be easy enough for you to handle on your own.

2. Compile a Credit Report

Contact all three credit bureaus to obtain credit reports. Because creditors do not typically report to all three bureaus, you must include all three reports. This is an important step because debts that are not reported cannot be discharged.

3. Receive Mandatory Counseling

You cannot file bankruptcy unless you have completed the mandatory credit counseling. It convinces the court that you have depleted all other options before filing for bankruptcy. The counselor must be approved by the court for the counseling to be considered valid.

You can often find this service online, or telephonically. Once the counseling has been completed, you should be issued a certificate of completion that you must include with the paperwork you file. If you do not complete this step, your application is certain to be rejected.

4. Complete the Bankruptcy Petition

Should you choose to file bankruptcy without a lawyer, the most complicated, and time-consuming task is usually filling out the official bankruptcy forms. You can access the bankruptcy forms online to save time. The packages are reasonably priced and include all the local forms required to file for bankruptcy in your state.

Once you have completed the files for bankruptcy, attach the necessary documents, and send the paperwork in person, or by mail, along with the filing fee. You must reply to any communication from the bankruptcy trustee as soon as possible. Failure to do so may result in the dismissal of your case.

5. File the Bankruptcy Petition

If you have not yet hired a bankruptcy lawyer, now might be the best time to do so. Although legal services are not mandatory for anyone filing bankruptcy, choosing to represent yourself can be risky. To file a bankruptcy petition successfully, you must understand federal, and state laws, and you need to know which ones apply to your bankruptcy case. Judges, and court employees, are not permitted to give guidance.

There are also numerous bankruptcy forms to fill out, as well as some significant differences between Chapters 7, and 13 that you must be aware of when making any decisions. If you do not understand or follow the correct guidelines, and practices in court, it may have a grave impact on the outcome of your case. You also run the risk of the trustee seizing and selling your property if you do not seek legal counsel.

6. Meet with Your Creditors

When your bankruptcy petition is approved, your case is designated to a bankruptcy trustee, who arranges for a meeting with your creditors. Attendance is mandatory for you, but not for the creditors. This is their chance to ask you, or the trustee questions about your bankruptcy case.

7. Attend a Financial Management Course

Finally, within 45 days of your creditors’ meeting, you must complete a post-filing Personal Financial Management Instruction Course. Visit the United States Trustee Program’s website to locate an approved financial management course near you. After finishing the course, the final step is to await word from the bankruptcy court about whether your debts were discharged.

What Happens After You File Bankruptcy?

Filing bankruptcy is a way to provide debt relief to those struggling financially. This can be accomplished by liquidating your assets to pay your debts, or by devising a repayment plan.

Both represent a new beginning, but often without some of the property, and assets that may very well have exacerbated, or caused the financial problem in the first place. Filing bankruptcy influences your credit score. It stays on your credit report for up to 10 years, depending on the kind of bankruptcy you have filed.

In this period, a bankruptcy discharge may make it difficult to obtain new lines of credit, and it may even lead to problems when applying for jobs. If you have loans that were taken with a family member, or a friend, they may be liable to repay at least a portion of the debt.

The truth is that if you are contemplating insolvency, your credit score is most likely already poor, and following this path allows you to improve your credit score over time if you consistently pay off your debt.

Even so, due to the long-term consequences of bankruptcy, some experts believe that at least $15,000 in debt is required for it to be beneficial.

The Debts That Bankruptcy Cannot Help You With

Although bankruptcy does cover most liabilities, there are a few that the court cannot discharge you of. These include:

• Certain taxes

• Debts acquired after the petition has been filed

• Child support, and alimony

• Fraudulent loans

• Debts obtained because of reckless driving or driving under the influence

• Loans, and other debt that has been acquired in the six months before filing a petition

• Bankruptcy does not cover the portion of the debt that is owed by a partner, or co-signer

Are There Any Other Options for Managing My Debt?

Most people consider bankruptcy only after they have exhausted their options for debt management, consolidation, or settlement. If none of these options are available, it may be worthwhile to investigate low-cost bankruptcy options.

Debt management is a service provided by nonprofit credit counseling agencies that aim to lower the interest rate on credit card debt and reduce monthly repayments so that they can be paid off. You could also choose to have your debt consolidated, which involves combining your loans to help you pay off all debts on time. Debt settlement is a method of negotiating with creditors to have them reduce your outstanding balance.

However, a settlement may not be the best bankruptcy alternative, as it is often reflected negatively on your credit report much like bankruptcy. Before you decide, it is advisable to consult with legal counsel to ascertain your best course of action.

Final Thoughts

Everything does not always go according to plan, and sometimes you may find yourself drowning in debts with no way out. The phone may be ringing off the hook with creditors demanding their repayments.

A bankruptcy filing may be your only way out in such a situation. It was designed to give those struggling under the weight of financial burdens a second chance and provide much-needed debt relief.

If you have exhausted all other options, and are looking for a fresh start, you can declare bankruptcy on your own. However, keep in mind that bankruptcy does not cover certain liabilities, such as child support, and that it may affect your credit score for up to 10 years.

While filing ‘pro se’ is possible, it does carry great risk. If you need to file for bankruptcy, you should talk to a bankruptcy attorney who can help you achieve your financial goals. If you need a bankruptcy lawyer near you, you can use a lawyer referral service to find one.

Another thing to keep in mind is that proceeding on your own still carries costs. Attorney fees may be what deters you, but you should always remember that employing the use of an attorney can show the court that you are indeed serious about your financial situation.