AMA #1: Pro Se debtors
Q: What do you think about pro se cases?
A: I worry about them. Pro se cases are when a person files a chapter 7 bankruptcy petition without being represented by a lawyer. I recognize that not everyone has income, but going pro se comes with serious risk. In those cases, it’s useful to reach out to either the Moderate Means Program or the Volunteer Lawyers Program at the Spokane County Bar Association. The waits are long, and you may only get advice about filing, but it’s better than going it alone. Upsolve is another option, but they will only prepare the petition, which is helpful if you have a no-risk case, but its really only a partial solution. In other words, they’re only a prep service and if there’s any risk with your case, they will not work with you. Naturally, most cases have risk.
The problems I’ve seen with pro se cases run the gamut.
Let’s take a case study:
I recently saw a case where the pro se debtor filed with nearly $10,000 in the bank (which she hid in her petition filing by failing to correctly list it on the schedules), but also filed a hardship waiver to get the filing fee waived, which is a very bad look since it requires a judge to approve it. So, the debtor lied to the judge and the court.
Now you might ask how this is possible.Two reasons: First, debtors do not file their bank statements with the petition, so the court cannot know their checking balance, except to the extent listed on their petition. Second, when you do not list the cash in your bank account, then the court cannot know that you really do have the money to pay the filing fee. Under these circumstances, the judge could approve a waiver of the filing fee. But as you’re about to see, this situation isn’t going to end well.
The gig was up when the debtor submitted their bank statements to the chapter 7 trustee. This act of submitting bank statements is not optional, nor could the debtor avoid it. During the subsequent 341(a) meeting of creditors, the chapter 7 trustee outright asked the debtor why she asked the court for a waiver of the filing fee when she had nearly $10,000 in her checking account. The debtor’s answer was not helpful, let alone exculpatory. So, not only did the debtor not list her assets–incredibly that entire section of the schedule was blank–but she didn’t exempt them either. This means she could, at least in theory, lose everything she owns–except for her car, which I think she did list.
Now, in the unlikely event that her case isn’t dismissed and she isn’t prosecuted or sanctioned by the court, she still loses the cash balance of that checking account. Why? Because you cannot exempt that much cash. While she would have been able to exempt some of it, she choose instead to exempt none of it.
Like I said, they debtor is going to lose that entire $10,000 because they exempted none of it. Had the debtor hired a lawyer, they could have had a good strategy and spared themselves the pain. To make matters worse, you cannot pull the ripcord and bail out of a Chapter 7. You have to hope you get dismissed or kicked into a 13. But if you lie or mislead to the court, you risk criminal penalties.
At any rate, and on that same docket, there was a case where the debtor didn’t show for the meeting, and yet another where the debtor bungled schedule I to the point where they had numerous material misstatements about income. The problem isn’t just that the chapter 7 trustee will move for a dismissal, but that the case won’t be dismissed and the U.S. trustee investigates the case.
That said, there are examples of cases where pro se petitions succeed, but that’s because these petitions occur when the debtor is in poverty. Trustees do not scrutinize these petitions as much as they do above-median 7s, and this results in cases with material misstatements getting discharged.
So there you have. This is why I worry about pro se cases.
*Note: I am not posting the case number from PACER because I’d rather not embarrass this debtor. She already has enough problems now.
