I’ve previously posted about when it’s time to push the panic button. You receive a notice of sale – your house is about to be auctioned off to the highest bidder and you’ve decided that urgent action is needed. You know that the only option you have left is the nuclear option: filing bankruptcy.
There are any number of ways that you got to this point, but none of those reasons matter at this point. You have to declare bankruptcy and you have to do it NOW.
People never plan to file bankruptcy. Bankruptcy just kind of happens to you. When you were younger and you were thinking about what your life was going to be, you thought about finding a spouse, maybe having children, getting that dream job, buying your dream house, driving that dream car. There’s no such thing as filing a dream bankruptcy.
Now that you’ve decided to file bankruptcy, you have options. You always have options. Here are some of them.
1 – You file yourself. You don’t know what you’re doing. You take the online credit counseling class, you pay your fees, you try to figure out how to fill out the petition and electronically file it. You don’t know if you’re doing it right. No one is really helping you with this. You’re screwing it up and starting it over. You’re worried if this is going to work. The sale of your house is tomorrow and you don’t know if you can get this to work on time. It’s super stressful, but it’s cheap. You’re paying only your costs, which is nice. You’ll eventually get someone at the courthouse to help you, and once you get that case number, you’re golden. You did it – you stopped your sale. But that’s all you did.
2 – You hire a lawyer to do it for you. The lawyer walks you through a series of questions that you can mostly answer off of the top of your head. There are other things that you might have to check your paperwork for, like for the name of the foreclosure attorney, or how much you owe some of your creditors, account numbers, stuff like that. You have that information at a quick glance. This is pretty painless. The lawyer is going to sweat the small stuff. The lawyer has filed thousands of petitions and he knows what he’s doing. There’s no wondering if this is going to work – it’s going to work. The lawyer is going to make sure that the auction doesn’t go through tomorrow. The lawyer is going to inform the foreclosure attorneys of the bankruptcy stay and obtain written confirmation that the sale has been scheduled. This is easy, but it’s expensive. You’re paying for a lawyer’s expertise and ability to make this as stress-free for you as possible. I know, I know. You’re filing bankruptcy; it’s not stress-free. You’ll still have stress, but if you have a lawyer, you know you’re going to be on the right track. If you do this right
3 – You hire a bankruptcy “specialist.” This is a guy who helped your aunt’s friend file a bankruptcy petition. He’s not a lawyer. He works in IT, or he’s trying to get his start as a real estate investor, or he works in one of those kiosks in the mall selling “as seen on TV” products. The point is that he’s just a guy who does this bankruptcy stuff as a side hustle. He’s decent with computers, and he’s done enough of these to know how to get that bankruptcy case number and print the confirmation for you. He’ll even pretend to be your nephew and call up the foreclosure attorneys to ask them how much you owe. Any decent foreclosure attorney won’t give him that information without written authorization from you, but you’ll give him your authorization and so he can handle that for you. Nice – and for about half of what that lawyer cost.
I had a debate today with a non-lawyer about the merits of choosing option 2 or option 3. Anyone can see that option 1 is the worst. There’s no point in saving the money if you don’t know what you’re doing, are getting no help, and can’t know for sure if it’s even going to work.
The debate went something like this: hiring the “specialist” to file a basic bankruptcy petition is what the client wants. They get to pay a discounted price and they get what they want – the auction to be stopped. Hiring the lawyer, while less painful than doing it yourself and maybe more beneficial in the long run for the client, is too expensive and not worth it. Going through an extended bankruptcy, getting into loss mitigation, staying the sale for so long that the bank has to make another motion (which could take months and months to decide) before they can sell the property may be good, but it’s not what the client is looking for. Hiring the “specialist” is a client knowing exactly what they’re getting into and paying a fair price for it. Hiring an attorney is an exercise in how much you don’t know, enduring the attorney trying to convince you that he knows what you want better than you do, and paying a fortune for the privilege.
You might be surprised to find out that I was the person arguing for the bankruptcy “specialist.” It’s not because I think the “specialist” does a better job, or is even a good value for the money. A lawyer’s expertise is going to be worth the price. For me, it’s difficult to ignore the sentiment from clients that they want what they want and they just want the sale to be stopped. They don’t want some lawyer telling them what they want or what they need. They know what they need and they don’t want to spend twice or three times the price as the “specialist” costs.
Now hear what the “specialist” gets you: a stay of the sale, maybe. An automatic dismissal of your bankruptcy case after about 6 weeks. A new auction scheduled for 6 weeks after dismissal, and a second bankruptcy filing. The “specialist” may know how to file a bare-bones petition, but they don’t know that in a second bankruptcy, the automatic stay expires 30 days after the petition is filed unless you make a motion to impose a stay for longer. Another automatic dismissal of your second bankruptcy case, and another sale scheduled for 6 weeks after that. A third bankruptcy filing within a year, and there’s no stay this time. The auction will go forward 6-8 months later than it was going to, and now you’re a serial bankruptcy filer.
A lawyer, on the other hand, will make sure that your bankruptcy schedules are complete, which makes sure that your bankruptcy isn’t dismissed. Having your bankruptcy not be dismissed will lead to your house not getting put back up on the auction block in 6 weeks. The lawyer will get you into loss mitigation if you want to try to work something out to keep the property. You can commence an adversary proceeding against any third party who may have tried to steal your property or money, during which time the bank can’t go after your property. If time is what you need, a lawyer will get you all of the time you need. If the bank winds up being able to sell the property, a year has probably passed and you don’t have to worry about the automatic stays applying in second and third bankruptcy filings within one year. Even if you do, the lawyer will know how to get the stay imposed.
The bottom line is that even though the customer wants what the customer wants, sometimes the customer doesn’t know what’s best for him. I won’t do a bare-bones petition for a client because that client’s values don’t align with my values, and that’s all right. Luckily for that client, there will be a “specialist” waiting to “help” him right around the corner.