You do not have to have a bankruptcy lawyer to declare bankruptcy. Nope. You can represent yourself. In fact, approximately 15% of all individuals who file bankruptcy in Colorado, go through the process without a lawyer. And while I don’t have any hard and fast statistics, based on my observation, most of those people get through the process without any problems.
Whenever I meet with someone for an initial consultation, I’m happy to tell them whether or not I have any concerns about them filing without a lawyer. Of course, I’d love for them to hire me. Representing people throughout the bankruptcy process is how I put food on the table and keep a roof over my family’s head. I also understand that not everyone can afford the costs that come with declaring bankruptcy.
But there are some circumstances that I believe not having competent legal counsel can get you sideways during the bankruptcy process and could end up costing you assets, money, and even the successful completion of your case. If any of these apply to you, think long and hard about going through the bankruptcy process without an experienced Colorado bankruptcy attorney:
- You own (or are purchasing) a home or any other real estate, such as a rental property, vacant land, or timeshare.
- In Colorado, you can only protect a certain amount of equity in the home you live in and you cannot protect any equity in any real estate that you don’t live in. Yes, the bankruptcy trustee will sell the house you live in if it has more equity than you can protect. They don’t care that you need it to shelter your family.
- You’ve given more than $600.00 to a friend or relative in the last two years.
- The bankruptcy trustee can recover money that you have repaid to a friend or relative in the year to two years before your bankruptcy was filed. She’ll give you the opportunity to pay that money to her, but if you don’t, she’s going to get it from the other person. You can imagine how awkward your next Thanksgiving get together will be if that happens.
- You’ve sold, traded, or given any personal belonging worth more than $1,000 or real estate to a friend or relative (including your spouse) in the last four years.
- You have to disclose anything that you sold, gave away, or traded in the last two years on your bankruptcy petition. If you received less than what that item was worth in return, the bankruptcy trustee may be able to get it back from that person, sell it, and use the money to pay your creditors. In some circumstances, the trustee can go after anything that was sold, traded, or given away in the last four years.
- You have more than $1,000 in savings that is not in a 401(k) or IRA.
- Money or savings not in a qualified 401(k) or IRA may not be protected when you file bankruptcy, even if your intent was to use the money for your retirement. You may have to turn that money over to your trustee who will use it to pay your creditors.
- You are expecting to receive an inheritance anytime soon.
- Any inheritance (including money in an IRA and possibly a 401(k)) or life insurance proceeds that you become entitled to within 180 days (you don’t have to receive it in that time) after your case is filed will have to be turned over to the bankruptcy trustee.
- You have filed a lawsuit, are thinking of filing a lawsuit, or are part of a class action lawsuit against a person or corporation because you believe they should pay you money for any reason whatsoever.
- The trustee may be able to “step into your shoes” in the lawsuit and take any proceeds from the lawsuit. In some circumstances, those proceeds are protected.
- You are divorced and were required to pay your ex-spouse’s debts or turnover property to your ex-spouse.
- Chapter 7 will not get rid of most divorce-related debts, while chapter 13 will get rid of some debts that chapter 7 doesn’t.
- You are filing Chapter 13 bankruptcy.
- Never in a million years would I advise someone to file a chapter 13 bankruptcy without a lawyer. It is a whole other animal from chapter 7 and, I have yet to see the court approve a chapter 13 plan in a case where the filer did not have a lawyer.
These are just some scenarios where filing without a lawyer could be a bad idea. There are others. Bankruptcy is not a one-fits-all process. It is very dependent on your facts, and just because you believe that certain things should be protected, once you file your case, you are under the authority of the bankruptcy court. Chapter 7 bankruptcies are almost impossible to dismiss, so you won’t be able to change your mind if the trustee comes after you or a family member.
We hope that you’ll talk to us before you decide whether or not to file without a lawyer. Our consultations are provided at no cost. You can schedule an appointment by clicking here.