The Internet is being used to assist in the preparation of legal documents in many different areas of the law. One such area is the preparation of the papers necessary to file a consumer bankruptcy. Internet services provide information about whether bankruptcy is right for you, and they can help you prepare the court papers if you decide to file. But is this a good idea? What are the pitfalls in these types of arrangements?
BANKRUPTCY IS A SERIOUS DECISION
Bankruptcy is a serious personal decision. Many issues in someone’s financial picture must be examined before reaching the decision to file bankruptcy. Whether a bankruptcy is right for you may depend on many considerations:
Have you tried other alternatives? Before filing a bankruptcy, a consumer should consider speaking with his or her creditors or talking to a consumer credit counseling agency (reliable agencies can be found by going to the National Foundation for Credit Counseling Web site at: www.nfcc.org).
Do you truly understand the difference between a Chapter 7 bankruptcy (liquidation) and a Chapter 13 bankruptcy (a wage earner’s case)? The results are very different and can affect your financial picture for years.
Do you appreciate the ramifications of filing a bankruptcy? A bankruptcy will stay on your credit report for 10 years while other credit information stays on your credit report only seven years. How will this event on your credit report affect your family and career?
It may not always be possible for someone to make the decisions simply by reading forms or articles on the subject. The Internet law sites are quite useful, but also very careful to avoid the unauthorized practice of law, which is prohibited in every state in the United States. These sites can answer questions, but they can do so only in a general way. As a result, the specific legal advice you will get from a lawyer may not be available.
LOW COST ALTERNATIVES FOR SOMEONE CONSIDERING BANKRUPTCY
Certainly making an attempt to talk to your creditors or to consolidate your debts with a low interest loan are reasonable, low cost alternatives. In addition, consumer credit counseling services charge a very modest amount (although you need to be sure to avoid scam businesses that have arisen in the consumer credit counseling area). They can help you put together a payment plan acceptable to your creditors.
You should check on the cost of a lawyer who is experienced in bankruptcy before going to an Internet site. You need to have this comparative cost information before you pay to download bankruptcy forms. Even a low cost lawyer, as part of his or her service, may be willing to advise on several issues that are important before deciding on whether bankruptcy is a proper alternative.
THE PROBLEM WITH INTERNET SITES AND DOWNLOADING A FORM
A bankruptcy form cannot think for you. Decisions need to be made before, during and after a bankruptcy proceeding, and there is no substitute for speaking with a trained professional to fully understand bankruptcy and its ramifications. In addition, an internet site cannot answer specific questions pertaining to your situation. Because of laws prohibiting the unauthorized practice of law, if the internet site allows you to ask questions, it may answer the questions in a more general way than a lawyer would answer them.
No matter how detailed the information is on the Internet site, you may still have questions after reviewing all of the information. Issues can be quite complex and speaking to a licensed lawyer may be the only way to truly understand the procedures. There are ramifications to the fact that you have filed a bankruptcy, which must be explained to you before you go through the procedure. Without speaking to a lawyer, you may not fully understand the process, what result can be expected, and the impact on your future.
CONSIDERATIONS WHEN USING AN INTERNET SITE TO PREPARE BANKRUPTCY FORMS
Several things should be considered before using an Internet site:
How much property do you own? If you own a great deal of property, or if you have a significant income, you may want to speak to a lawyer to determine the best way to proceed.
What kind of debts do you have? Are you in financial difficulty because of child support obligations, alimony, taxes or student loans? If so, these debts may not be dischargeable in bankruptcy (will be extinguished after the bankruptcy). Going through the process may not help your financial picture, and may actually hurt you in the long run because of the adverse effect on your credit report.
Do you understand the different types of bankruptcies? You must understand the differences between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy. These have very serious and different ramifications that you need to understand before preparing the appropriate forms. After reviewing the Internet service, do you fully appreciate these differences?
Do you understand the adverse impact on your credit report? If you are thinking about starting a business in the next few years and need to get a personal loan to do so, it may be very difficult for you to obtain such a loan if you have declared bankruptcy. It may also be difficult for you to buy or rent a house, get insurance, or buy a car.
Is there a cost savings? Many lawyers will prepare bankruptcy petitions quite inexpensively, and you will have someone to talk to if you need someone. Understand the fees a lawyer will charge before paying to download bankruptcy forms.
Like everything on the Internet, there are good things and bad things. If you don’t own a lot of property, your debts are dischargeable, and bankruptcy is the only way to brighten an otherwise bleak financial picture, then using an Internet form may very well be a reasonable, low cost alternative for you. But before you make that decision, be sure to understand all of the options because bankruptcy will have a long term impact on your future. If you are unclear about anything, seek legal advice from a lawyer, not the Internet.
Alan Kopit is a consumer attorney with the firm Hahn Loeser and Parks LLP in Cleveland, Ohio and a regular contributor to “Today.”