The Good, Bad, and Ugly about DIY Bankruptcy Chapter 7

Judging from the popularity of the search term “DIY bankruptcy chapter 7” you would think that this legal procedure is the easiest thing in the world. There are lots of firms offering to file your completed paperwork or selling software akin to TurboTax for bankruptcy. Chapter 7 is supposed to be the “easy” bankruptcy, a liquidation that relieves you of unsecured debts such as credit cards and medical expenses and prevents further collection action via the automatic stay. It sounds simple but there are many different steps to filing a successful DIY bankruptcy chapter 7 that is accepted by the court.

1. Chapter 7 bankruptcy includes limits on income and property. The first step is making a full and complete disclosure of income and assets versus your debts. The court will evaluate this and then decide whether or not you may file for Chapter 7. In Florida, you must make less than the state’s median income in order to be eligible to file.
2. Complete the federal means test. These forms must be completed for the court to compare your income with the median income for similarly sized households in Florida. There are three forms – 22A-1, 22A-1 Supp, and 22A-2 – though if your income is not above the median for your household size, you will only need to fill out 22A-1.
3. Credit counseling. Before filing, you must attend credit counseling from an authorized source and file documents that certify this requirement has been met.
4. Complete all of the official bankruptcy forms including the voluntary petition. Other forms include a list of your unsecured creditors, Statement of Financial Affairs, Statement of Intention, List of Case Commencement Notes, and copies of any standing debt repayment plans.
5. You’ll also need to provide lists of real property, personal property, secured debts, income, assets such as 401(k) and other retirement accounts or educational savings accounts, expenditures, and any contracts or leases that will be affected by the bankruptcy.
6. File a complete petition. Upon filing the automatic stay goes into effect and creditors must cease contacting you or moving forward with any actions of law such as garnishments or lawsuits.
7. The US Trustee. A trustee will sell “nonexempt” property in order to settle with your creditors. Exempt property varies from state to state, and you will need to be fully informed as to Florida bankruptcy exemptions.
8. Attend a meeting of your creditors – also called a 341 meeting. This will be scheduled within 40 days of your filing, and you will be required to testify under oath.
9. Personal financial management instruction is mandatory and scheduled after the 341 meeting. It is mandatory for you to complete this course with an approved provider within 45 days of the 341 meeting or have your case dismissed.
10. Meeting final requirements. After the 341 meeting, the trustee will present you with a list of requirements that must be satisfied before your bankruptcy is discharged. This will typically take between four and six months and include making the nonexempt property available to the trustee. Requirements vary widely and depend on the individual characteristics of each bankruptcy filing.

Head spinning? It’s an awful lot or just one person to manage. In fact, one bankruptcy can be a full-time job for one person. Let’s look at the good, the bad, and the ugly about do-it-yourself bankruptcies.

Let’s say you do a DIY chapter 7 bankruptcy

• Good: A DIY chapter 7 bankruptcy is cheap in terms of your wallet.
• Bad: It’s time-consuming and can take even more time when you have to backtrack and redo.
• Ugly: An incorrect filing gets dismissed.

“So? I can spring for a bankruptcy preparer to do all the paperwork, then file on my own.”

• Good: Not as cheap as a DIY chapter 7 bankruptcy, but you do save time with having someone else handle it.
• Bad: There are no certifications for bankruptcy preparers.
• Ugly: By law, bankruptcy preparers can’t offer legal advice because they are not attorneys admitted to the federal or state bar.

“Well, if my filing gets dismissed, I can just redo it and come back – right?”

• Good: Hard to find any other than that practice makes perfect.
• Bad: Your creditors are now free to come after you since the automatic stay has been lifted with the dismissal.
• Ugly: If your case has been dismissed with prejudice, it means the court feels you have acted in bad faith and you may not refile for a time period set by the court, or you may be prohibited from discharging the debts of your dismissed filing in a future filing.

As you can see, the ugly has the potential to get really ugly.

Why Use an Attorney?

If all of the hypothetical scenarios above are not enough to convince you, perhaps knowing that bankruptcy is a specialty practice will convince you. Bankruptcy attorneys specialize in filing successful bankruptcies and winning a full discharge for their clients. They are able to work with you and offer their best legal advice and obtain the best possible results – unlike bankruptcy preparers. While you go on with your life, a bankruptcy attorney works to free you as much as possible from your debts and allow you that fresh start you need.

We Can Help!

Instead of rolling the dice, try reading through our blog to see all of the entries and make use of the information. We have two offices – one in West Palm Beach and one in Fort Lauderdale that are both open six days a week. We can even make an appointment for you on a Sunday! Even better, your first meeting with us is free. Gather up your paperwork, make a call, and let us help you by filing a successful petition for Chapter 7 bankruptcy. Check us out on AVVO.com and see what our clients have to say about how we have treated them and address their concerns and see Chad’s endorsements from his peers. You can trust us to fight for you and to offer legal advice that is in your best interests.