Be Careful in a DIY Bankruptcy Filing

One of the most ironic and strangest things about bankruptcy is that you have to have money in order to file a bankruptcy case. You will have to pay filing fees and credit counseling fees. You will also have to at least hire a petition preparer to help you with the required filing forms and are well advised to hire a bankruptcy attorney.

As an aside: You may think you can file your own bankruptcy case- just like you may think you can fix a leak on your roof. And you may be right, you likely could fix the leak. But, with your lack of experience, you have a greater chance of falling off the roof than a professional. Consider bankruptcy the same way, you could do it yourself but you are much more likely to cause yourself problems that a bankruptcy lawyer would know how to prevent.

Still, I am encouraged by a new program being rolled out in New Mexico and two other bankruptcy districts. The bankruptcy court in New Mexico is introducing the Pro Se Pathfinder Project. The Pathfinder Project is a new program that tests a do-it-yourself e-filing of  consumer bankruptcies- similar to online tax preparation software.

In New Mexico, one out of every 10 bankruptcy petitions is prepared by the debtor him or herself- known as a “pro se” filing. In addition, the state has a scarcity of consumer bankruptcy attorneys in much of the state. Also participating in the rollout is California’s central judicial district – the Los Angeles area – where one-third of all bankruptcy petitions are pro se; and New Jersey, where 8 percent are pro se.

The Pathfinder Project will be designed with graphics, audio and video to make it as user friendly as possible. Pathfinder will guide the do-it-yourselfer through the paperwork, moving the computer cursor through the multitude of requests for information and documentation. A box explaining what’s wanted will pop up as the cursor hits each request. Best of all, the explanations will be in plain language.

If successful, the Pathfinder Project could save many potential debtors a good deal of money. In Albuquerque, New Mexico, a consumer can pay in the range of $800 for an uncomplicated petition for a Chapter 7 bankruptcy case. A chapter 13 petition, however, can run as high as $4,500 depending on the circumstances.

The Pro Se Pathfinder Project will not offer legal advice, and is not aimed at replacing attorneys, but simply serve as a guide through the paperwork. It will be offered as a free alternative to bankruptcy petition preparers, who operate outside the court system.

Still, the tendency will be for people to use the Pathfinder Project and not seek the help of a bankruptcy attorney- after all, most will think the hard part of filing out the filing documents is over.

Even with filing documents done, I would not recommend filing a bankruptcy case on your own.  Either way, make sure you read the Road out of Debt so you understand what you can and cannot do through a bankruptcy filing and so you have a good knowledge of what will happen to you and your assets in a bankruptcy case. Most likely nothing will happen, but read the Road out of Debt to make sure.