Category Archives: Trustee Letters

Saving Pennies, Losing Dollars: Tales of Bankruptcy Filings Without Legal Advice

Mounting bills, calls from creditors and declining funds leads to a maddening level of desperation. People often feel that they are too broke to hire an attorney to file their bankruptcy. You are between a rock and a hard place, you need to get rid of the stress of your debts and it seems like the best thing to do is to file a bankruptcy on your own.

You are not alone in this thought. Between 25% and 33% of all bankruptcies filed in Arizona are filed by people who have either attempted to prepare their own bankruptcy documents or hired a paralegal service to prepare them.

Many of those people end up having an unpleasant and expensive experience with the bankruptcy court. Many will have assets confiscated. Many will lose the only decent sum of money they receive all year – their tax returns. Yes, the bankruptcy court will take your tax returns! This is why you need to plan for a bankruptcy with an attorney.

Here’s an example what can happen if you choose to file a bankruptcy without the assistance of an attorney.

I met with a woman about a year ago who was unaware that her tax refund, which was substantial, would be confiscated by the Bankruptcy Court Trustee. She ending up losing nearly $8,000 in her tax return money that she desperately needed to the bankruptcy system. Because she didn’t have an attorney at her side. That money could have been used to purchase a vehicle, pay for an attorney, and help with utilities. With careful disclosure of that spending, she would have survived her bankruptcy without losing other assets. She thought she had to be in a rush to file the bankruptcy, and didn’t get the advice she needed to plan accordingly.

This can be avoided with experienced representation. 

I stress that this planning must be done appropriately, by competent attorneys with an intimate knowledge of what is allowable in pre-bankruptcy planning and what is not. Pre-bankruptcy planning is intricate and can take time. But it is extremely valuable.

Another classic scenario involves a person who has been sued, and is consequently highly motivated to file a bankruptcy before a wage garnishment starts, but may also have a large tax refund coming, or perhaps a reimbursement for some work expense, or a personal injury claim, or an inheritance.

Again, they rush in with no legal advice, get a paralegal service to type up what they think they need to file, and then lose assets unnecessarily.

Recently, my office assisted a bankruptcy client with pre-bankruptcy planning on how to purchase a home for their family by using a personal injury recovery as a down payment. We were able to help them to keep that home.

Saving pennies can cost significant dollars. The main ally you have is an experienced attorney who can offer sound advice and good knowledge. Document preparers, and, sadly, lawyers who charge cut rates and who will only provide cut-rate legal advice, are not in your best interest.

Don’t be penny-wise and dollar foolish!

If you have questions about your bankruptcy eligibility, or ways to avoid bankruptcy through other means, schedule a free initial consultation with Daniel Rylander by calling (520) 299-4922. Upon hire, we provide sustained support throughout your bankruptcy process.