Do You Need A Lawyer To File For Bankruptcy?

In this day and age, the internet has become a viable source for everything from buying groceries to purchasing a plane ticket. However, using the internet to research information about bankruptcy can be a slippery slope, filled with bad information or things that do not apply to each unique situation. It is possible to file a bankruptcy case yourself, however it is not recommended. When dealing with this type of case, you have to file correctly, have all required documents properly filled out, and list all property and debts, or your case could be dismissed. Another thing to keep in mind is individual cases are randomly audited. “The audit checks for accuracy, completeness, and truthfulness.” You must not lie, falsify records, or destroy or hide property (1).Filing for bankruptcy in Missouri, Kansas, or any other state is an extremely technical and complex process. A single error could negatively affect the results of your case or even result in your case being dismissed. In certain situations those errors can lead to the debtor losing the right to file another bankruptcy and/or lose certain protections in future cases.

The term “pro se” mean to advocate on one’s own behalf before a court, rather than being represented by an attorney. A pro se litigant is still expected to recognize the rules and procedures of the local and federal courts. One must also be familiar with the Federal Rules of Bankruptcy Procedures and the United States Bankruptcy Code. Even though you are not an attorney; you will still be held to the same rules and standards.

Some people choose to file bankruptcy pro se because they believe they cannot afford an attorney. Speaking with an attorney and discussing your options is your best option. Having an attorney is to your advantage and will likely save you time, money, and offer more protection for your assets. In the instance you have an aggressive creditor violating the collection laws, Heartland Law will prosecute any of your creditors that do not follow the rules once bankruptcy is filed. If you do not have an attorney you will have to handle harassment from creditors, lawsuits and illegal post-bankruptcy garnishments on your own.

There is more to filing for bankruptcy than simply filling out forms. Trying to save money by filing yourself can hurt you in the long run. Often one has to seek counsel to fix a mistake. In the end it will cost you more than if you had simply worked with an attorney in the first place.

Contact one of our experienced bankruptcy attorneys at Heartland Law for a free initial consultation to evaluate your options.







Footnotes

(1) “Filing for Bankruptcy without an Attorney,” This site is maintained by the Administrative Office of the U.S. Courts on behalf of the Federal Judiciary. http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyResources/FilingBankrup tcyWithoutAttorney.aspx

What An Automatic Stay Can Do For You

Upon filing for bankruptcy, an injunction goes into effect immediately; this injunction is called an automatic stay. An automatic stay halts collection activities such as filing or continuing a lawsuit, making requests for payment, and notifying credit reporting agencies of an unpaid debt. An automatic stay is particularly helpful when a debtor is at risk of being foreclosed on, evicted, having utilities turned off, or found in contempt for failing to pay child support. This stay is a powerful reason in itself to file for bankruptcy.

Below are some of the situations that the automatic stay can assist with:

Foreclosure: If your home or other real property is being foreclosed upon, the automatic stay will temporarily halt the sale in a Chapter 7 filing, or permanently stop the sale in a Chapter 13 filing where a plan is filed to catch up the arrears.

Utilities: An automatic stay can assist when you’re behind on your utility bills if you are receiving threats to disconnect your gas, electric, water or telephone services. The automatic stay will assist in preventing disconnection for at least 20 days.

Eviction: If you are facing eviction from your home the automatic stay may offer some momentary help. In the instance that your landlord already has a judgment of possession against you, the automatic stay will not affect these evictions proceedings. Additionally, the automatic stay cannot help you if the landlord alleges that you’ve destroyed the property or are using controlled substances there. In some cases, the automatic stay may help you to stay a few more days or weeks, however the landlord will most likely ask the court to lift the stay and proceed with the eviction.

Repossession: If your vehicle is in danger of being repossessed, filing bankruptcy can stop the repossession with the automatic stay. In a chapter 13 filing, a vehicle that has been repossessed recently but not yet auctioned off can usually be retrieved.

Garnishment: When bankruptcy is filed, wage garnishments cease; additionally, you may be able to discharge the debt in bankruptcy. An automatic stay can often prevent collection efforts from overpayment of public benefits, however, the automatic stay does not prevent the agency from denying or terminating benefits in the future for this reason.

Below are some of the situations that the automatic stay cannot assist you with:

An automatic stay does not help with certain tax proceedings. The IRS can still issue a tax deficiency notice, audit you, demand a tax return, issue a tax assessment or request payment of an assessment. The automatic stay will stop the IRS from issuing new tax liens or seizing property and income.

The automatic stay will not help you in during a lawsuit against you seeking to determine paternity or to establish, modify or collect child support.

Creditors can ask the court to lift (remove) the automatic stay for various reasons. This generally happens 21 days or more after bankruptcy was filed. When there is any doubt about what an automatic stay can assist with, contact your bankruptcy attorney at Heartland Law for more detailed information specific to your case.

Bankruptcy and Form 1099-C

According to the IRS, if a creditor writes off a debt that you owe, or if a debt with a creditor is settled for less than the full amount, you could owe money to the IRS. This includes debt from credit cards, car repossessions, foreclosures, etc.  Creditors that forgive $600 or more are required to file Form 1099-C with the IRS. The IRS treats the forgiven debt as income, and therefore you may owe income taxes.

However, it is my understanding that when a debt has been discharged in bankruptcy that debt does not need to be included as income for tax purposes.

If you file an IRS Form 982 to counteract this, you may be able to avoid payment by proving you’re insolvent at the time the debt was forgiven. It is my understanding that the IRS has specific guidelines and a Worksheet used to define "insolvency".

You can prove your insolvency by filing IRS Form 982 and attaching it to your federal income tax return to combat Form 1099-C. This shows that your debt was canceled during a bankruptcy case and is now excluded from taxable income. 

What if the debt is in an active Chapter 13 and the 1099 C was filed prior to Discharge? 

 You may want to check Line 1a on Form 982—but include an Attachment to the Form 982 that you file with the IRS that states that the debt has not yet been discharged—but it is included in a current Chapter 13 case.  It would also be recommended to provide the IRS with your current case number.  If you provide the IRS with ALL the information, I assume that they will notify you if you are mistaken.

**** Note: You should seek the advice of an accountant, as this is not legal advice regarding taxes. 

Bankruptcy Myth: I Can't File at All

While the bankruptcy reform of 2005 did change a lot of things about bankruptcy, but it did not eliminate your ability to file bankruptcy at all. There are now income guidelines, known as the "median income" and if your household falls above the median income, you still may qualify for Chapter 7 bankruptcy.

Your attorney will use the "means test" to calculate your income minus allowable expenses, to determine whether by IRS standards you have disposable monthly income each month. If you do not, you pass the means test and can file Chapter 7. If you do not pass, you still have the option of filing a Chapter 13 bankruptcy to repay a portion of your debt (anywhere from 1%-100% repayment based on how much disposable income you have). Get the facts before ruling it out - go ahead and schedule that first consultation with your bankruptcy lawyer and see where you stand.

Contact us anytime to set up a consultation in Kansas City, MO; Gladstone, MO; Liberty, MO;  Platte city, MO;  Riverside, MO; Independence, MO; Kansas City, KS; Overland Park, KS; Leawood, KS;  Shawnee, KS;  Shawnee Mission, KS; and Leavenworth, KS.

Follow me on Twittter @heartlandlawyer for all the latest updates!