DIY Bankruptcy: Is it a Good Idea?
Ever heard of do it yourself brain surgery or building your own rocket to fly to the moon? Though bankruptcy isn’t rocket science or brain surgery, it sure isn’t making Kool-Aid either. Legally you can file bankruptcy on your own, but that doesn’t mean you should, does it?
Don’t Take it from Me, Ask the Federal Government
Here is what the United States Bankruptcy Court says about filing bankruptcy yourself.
“While individuals can file a bankruptcy case without an attorney or “pro se,” it is extremely difficult to do it successfully… hiring a competent attorney is strongly recommended.”
The court then lists several reasons.
- The bankruptcy rules are very technical, nuanced, and difficult to understand fully.
- Even the smallest mistakes can have huge consequences for your case, such as it getting completely dismissed.
- Errors in your case could end up costing you the right to file another case.
- Mistakes in your case could cause you to lose certain protections in a later case, like the automatic stay. Without it, your bankruptcy will not protect you from creditors.
- The success or failure of your bankruptcy has long-term financial and legal consequences.
Some Statistics from the Experts
In the book Broke: How Debt Bankrupts the Middle Class, we get a glimpse into how difficult it is to successfully file bankruptcy yourself. In it we learn that…
- Almost 18% of chapter 7 cases filed by debtors without an attorney are dismissed or converted to a chapter 13, meaning either their case was a complete failure or they were forced into a payment plan where at least some of their debt had to be paid back.
- By contrast, under 2% of chapter 7 cases filed by attorneys were dismissed or converted to a chapter 13 payment plan.
- Of the chapter 13 cases filed by debtors with no attorney, a staggering 91% were dismissed by the court.
- Only 15% of chapter 13 cases filed by attorneys were dismissed.
Sometimes You Get What You Pay For
Although you will have to pay court filing and other fees whether or not you use an attorney, you don’t have to pay an attorney to file your case. But knowing how great is the risk of failure and how devastating are the consequences to your long-term financial and legal situation, does it make sense to file your own bankruptcy? Both bankruptcy attorneys and the bankruptcy courts agree that it’s a bad idea.