Is Filing Bankruptcy on Your Own a good idea?

Listen to the full Podcast #9.

Matt: Welcome to the Fresh Start Podcast, brought to you by attorneys Jeena Cho and Jeff Curl of JC Law Group, whose practice is dedicated to bankruptcy for individuals and small businesses.

Thanks for joining us. I’m Matt Haze. Please note that this podcast is not legal advice. For more information visit JCLawGroup.com. Now let’s welcome Jeena and Jeff to our ninth podcast.

How are you guys today?

Jeena: Good Matt.

Jeff: Good Matt.

Matt: Let me give you a little inside information about what happened. Jeena sent me an email before we started recording and I said, “What are we going to talk about today?” Jeena said, “Our topic today is about why you shouldn’t cut your own hair,” which I’m a little confused by because last I checked this isn’t a health and beauty or a style podcast. We usually discuss items related to bankruptcy.

Jeena, are you switching careers or something? Do you have some news or something?

Jeena: Yeah, I decided that I’m going to become a hair stylist. Actually that would be a terrible idea because I only tried to cut my hair once. I think I was about eight years old. I got this brilliant idea that I was just going to trim my bangs and of course it went disastrously and I had a very, very bad haircut for months and months and months.

It’s fine to try and cut your own hair, but we also see this with our clients where they try to file their own bankruptcy or they try to do their own estate planning, write their own prenup, etc. That’s actually what we’re going to talk about today is trying to be your own lawyer.

Matt: Which seems to be growing more and more because there are more options. Just like any industry, there are ways to be able to do a lot of services, which before, earlier in years past, you may not have been able to do on your own, but there are website and do this all DIY whatever you want to do anything now.

One of the big services I think first of, Jeff, when we’re talking about this topic and you hear a lot of advertising about is services like Legal Zoom. There’s other places like that online where for X amount of dollars you give them your visa card, you get the paperwork, you fill it out and voila. You get that service. Compared to going to a professional where you can have that done.

Is using a service like that, depending on what type of thing you’re doing, a good or bad idea?

Jeff: How do you say it’s a bad idea without sounding like a self-serving attorney?

Matt: Let’s talk about the real reasons why that is. What makes you guys standout? Using an attorney for a professional type of service like that compared to Legal Zoom. What are the pros and cons with that?

Jeff: Let’s go back to law school 101. The first thing you learn your first year of law school is that – and there’s a saying that they have. He who represents himself has a fool for a client. It’s true. You need someone who has spent years learning the art and someone who is a professional and sees angles that you can’t see or don’t see or won’t see.

You want them to guide you. Even when Jeena and I, before JC Law Group was PC, a professional corporation, we were a partnership and we could have formed a corporation. We could figure that out as attorneys, but we hired someone because we know it’s a good idea to have someone sit down and part of it is not just filling out forms.

It’s planning and thinking things through and you’re not going to get that with filling out forms. You want someone to sit there and throwback ideas at you or contemplate angles that you didn’t see or bring up problems and have you solve them.

I don’t even recall at this point all of the forms that go into forming a corporation. It’s not much, but that’s not really what it’s about. It’s not just getting documents filed with the Secretary of State. It’s thinking about all the other issues that go into forming a corporation.

Matt: Because there’s so many option too because you have an S-Corp, C-Corp, LLC. There are other different forms for different states and different things. I’m a former real estate agent. I sold for a short time.

When I went to real estate school, our first thing we were taught, and we were reminded numerous times and even after you graduated and you sold real estate, is if there’s a point where you think you are practicing law, you must stop and consult an attorney.

Because as an agent you are not allowed to practice real estate law, even though you fill out forms and all, but if you go to a certain extent, you have to bring on a professional at that point though. You always have to.

Jeena, what do you think?

Jeena: There’s a reason why we do this for a living. I met with a client recently and she sits down and she goes, “Well, I don’t think I need to hire an attorney because I read the NOLA book cover to cover. I’m confident that I can do this on my own.”

I’m sitting there thinking, “Why are you sitting here?” She goes, “Well, but I just had one little question,” and of course her one little question ended up not being a little question and not something that’s very simple, but my answer to whether you should use Legal Zoom or not is ask yourself how important is this.

If you screw this up and Legal Zoom didn’t work, what’s the worst case scenario? In case of a bankruptcy, you can lose assets in a bankruptcy if you don’t do it right and if you don’t care about losing assets, then by all means go and do it on your own, but if it matters, then you should hire someone.

Just like cutting your hair. If you don’t care what your hair looks like after getting a haircut, by all means cut it yourself, but if you do, then you should probably go and see a professional.

Matt: Now along with this there are numerous different services that attorneys offer. You guys are bankruptcy attorneys, but you talk about the corporation, you talk about estate planning and all that. Are there any services that are good to use an online service or is it pretty much everything that you should really consult an attorney just to make sure that all the I’s are dotted and T’s are crossed?

Jeff: I don’t know every area of law, so I can’t say, but I don’t think I would deviate from that. First of all, go watch hearings. Sit there and watch the Chapter 7 meeting of creditors or Chapter 13 meeting of creditors. They’re open to the public and if you’re curious what it’s like, go look online, find the calendar where it shows people representing themselves and go watch that.

Watch the attorneys that represent the people. Then go watch the people represent themselves and watch what happens.

Matt: That sounds like a good time there actually. That would be quite interesting to watch. Seriously.

Jeff: It’s night and day, but it can also be really sad and really intimidating because things don’t necessarily go right. I would think twice very hard about doing that.

Matt: Since we’re talking about bankruptcy, let’s get into that a little bit more. Because there are so many different forms and different ways to file and there’s so many different pieces and parts that come with it. Is there a simple bankruptcy, Jeena, or something basic or is it always going to be something that’s very involved and a lot of different moving pieces and parts?

Jeena: There are certainly “simple bankruptcies,” but generally what I think of as being a simple bankruptcy is very, very different than what my clients think of as a simple bankruptcy. Typically the clients come in and they go, “Well, I have nothing,” and you delve into it a little bit and it turns out they have a business or they have a house or their name is on their parents accounts or whatever it is.

There are all these complications that go along with that and it’s obviously our job to sort through all of those complicated issues and figure it out.

Jeff, what would be an example of a simple bankruptcy?

Jeff: Someone who is unemployed or has had almost income in the last six months, a few credit cards, owns nothing, but you have to cover all the what ifs. Has had no transactions with family members, hasn’t had names on titles or removed. You have to cover a lot of negatives, which is really hard to do.

The simple cases are rare. We don’t get a lot of those.

Jeena: When Jeff says no assets, what we think about as assets and what the clients think about as assets are also two very different things. For example, if you were involved in a car accident and you bring a claim against someone, that’s considered an asset in bankruptcy court, but most people don’t really think about that as being an asset.

You think about tangible things like something you can sell for money. All these intricacies that go into it.

Matt: Are you able to even file your own bankruptcy? I know, Jeff, you said that there are times when you can go to a court session and you can see someone defending themselves. Is that even possible to go through and file this paperwork and do everything on your own? I should probably say attempt to be able to do it.

Jeff: You can. As an attorney, we have to get something called ECF access, which is electronic court filings. We file everything electronically and we go through training to go do that with the court. We don’t walk down to the courthouse and get a stamp from the clerk like you think of traditionally, but people who file on their own one time would do that.

It’s also just all the requirements of doing the credit counseling that you have to do before you file and paying the fee and all kinds of little procedural things. That’s what really throws a lot of people off too. I can’t imagine doing something like that on my own, but some people obviously think differently than I do.

Jeena: Like Jeff said earlier, when we need legal help, we don’t do it ourselves even though we could. Obviously there are two lawyers here, but it goes along with everything. Even painting your house. We all know you can paint your own house, but why have a professional do it? Because they know what they’re doing.

If it’s something where the outcome is important to you, I think it really makes sense to go out and seek professional help.

Jeff: Matt, this whole idea about things are pretty simple or someone has read the NOLA book or read a bunch of stuff online, don’t forget that bankruptcy is its own entire court system. We have our own judges, our own law under Title 11 of the United States Code. We have thousands and thousands of court decisions that interpret all these codes and the courts don’t agree, the trustees don’t agree, the attorneys among themselves don’t agree.

We had a conference with a bunch of bankruptcy attorneys in San Francisco about a year ago and there were a thousand attorneys in the same room talking about the means test part of filing a bankruptcy. I’m telling you, there were a thousand people who’ve had a thousand different thoughts about how it should be.

When someone sits down and read some book that someone wrote and thinks they have it down, that worries me.

Matt: It’s funny how you mention about all the different people. It’s almost as if there’s a separate world that bankruptcy law revolves around. You guys pretty much know a lot of the players involved in it too. There’s a lot of networking, a lot of connections, a lot of people know each other. I think there’s a lot of value in that too where someone may go in and try to do it by themselves, they don’t know anybody. They don’t know where to go.

You guys know a lot of the players. You already have those connections and that can probably help pay off a little bit for some of your clients too when it’s all said and done.

Jeena: Yeah, absolutely. We know who the trustees are. We know which trustee requires what documents. We know the personalities of the trustees and the judges and that in itself is incredibly helpful when going into it.

Matt: That experience, more than anything, is what truly makes it worthwhile with anything. Even when you talk about a painter, a painter can walk into a room and say, “I want to do this color,” and they go, “Great. Maybe you should do this shade because the light comes in this way or that way.”

There’s a lot of value that comes with that knowledge, that experience that you guys have been doing it for years that a website or paperwork or a book cannot bring when it’s all said and done.

Jeff: That’s true, but you’re always going to meet the people who just don’t buy it. I’ll just say I had a family member who I had a conversation with recently about doing a trust and said, “I’ve got this friend of mine and he’s a certified specialist. You should just talk to him and put it together.”

He’s like, “Well, I don’t know. What if it costs $3,000 or something?” I said, “You’ve spent your whole life slaving over money, thinking about money, saving money for retirement and all of a sudden once you retire, then you clam up and you don’t want to go through any steps to protect it.”

There’s something about perceptions people have about lawyers and about service. There’s some disconnect. I don’t know if it’s from media or what, but it’s so weird. I want to tear my hair out.

Matt: Especially in the bankruptcy world, you look at the percentage of people that try to file by themselves versus the amount of people that hire a professional. That’s a night and day difference and there’s probably a reason why it is that way.

People start to try to go through the process and all that, but then they realize they need a professional. That’s why the majority of people, more than likely, will hire an attorney that has that experience and can actually help them out and get then on the right track.

Jeena: Yes and it’s always more expensive for us to come in and fix somebody’s mistake than had we done it right in the first place. It may not even be something that’s fixable at that point. It might be just something we’re coming in and doing damage control.

Jeff: One of our colleagues, I can’t remember which one, but we were talking about people trying to lowball and making a fight for the bottom end prices. He was talking about a barber in his town put up a sign that said, “Any haircut for $5,” and that his friend opened up a barbershop across the street that said, “We’ll fix any bad $5 haircut for $15,” and that the $15 guy is the one that survived.

That’s how it is with us is sometimes we do get messed up cases that come across our desk and it is less likely for us to want to take on that case at that time.

Matt: Jeena and Jeff, a great conversation. Thank you so much.

Jeff: Thanks.

Jeena: Thanks.

Matt: Thanks for joining us. For more information and to listen to other episodes of our podcast, visit JCLawGroup.com. JC Law Group is a debt relief agency under the United States Bankruptcy Code.