The first and most important step when deciding to file bankruptcy is should you enter the rapids by yourself or hire a trusted guide to assist you through the dips and turns the river holds. Bankruptcy is a complicated and meticulously detailed process and electing to hire counsel is your first step in a successful bankruptcy filing. Should you choose to enter the bankruptcy waters alone you risk many things, the most common being technical filing errors and filing under the wrong chapter.
Filing Under An Unsuitable Chapter
U.S. Bankruptcy Code allows for individuals and businesses to file for bankruptcy protection under various chapters. The rules further dictate how you must qualify under the various chapters and the financial relief afforded under each Chapter. Many individuals may find that they are eligible to file under either Chapter 7 or Chapter 13. However, people who are unfamiliar with U.S. Bankruptcy Code will find it difficult to determine the various benefits and disadvantages associated with either Chapter.
- Chapter 7 – Is often referred to as a “straight bankruptcy”. The individual(s) will come out of the bankruptcy with no obligation to pay off the discharged debt, however, should they wish to keep items such as a house or car they are obligated to continue making timely payments.
- Chapter 11 – Is for use by large businesses to restructure debt so that they can continue operating the business.
- Chapter 12 – Is for use by those in the agricultural industry or commercial fishing industry. Chapter 12 allows for debt to be restructured permitting for the operations to continue.
- Chapter 13 – Debtors are allowed to pay all or part of their debts over a selected period of time.
An important note, should you file under the incorrect chapter and your bankruptcy be dismissed, it will become increasingly difficult to re-file your case under the correct chapter. Essentially making the option of financial relief through bankruptcy a rather unobtainable option.
Bankruptcy court, as all court systems, is governed by a multitude of local and federal rules and procedures. The rules and procedures must to be followed exactly as indicated in the rules and documents filed incorrectly or untimely will be returned. As noted on United States Bankruptcy Court (USBC) website, bankruptcy court clerks and judges are bankruptcy court employees and are strictly prohibited from providing advice to pro se petitioners. While the USBC does provide a self-help section, it cautions pro se debtors of the nuances of filing without the assistance of counsel. The implementation of e-filing has only increased the number of guidelines that must be filed in turn increasing the number of rejected filings.
Technical errors and incorrectly selecting which Chapter to file under are only two of the issues that may cause issues for those representing themselves. Seeking the assistance of bankruptcy counsel will allow you to explore the many avenues of bankruptcy as well as protect you from the pitfalls of representing yourself. Bankruptcy counsel can also advise you of the consequences associated with each chapter as to your personal assets, the tax ramifications for filing bankruptcy, and provide guidance on the road to recovery.