You can do everything online these days from buying a car to ordering a pizza to filing your tax returns.
But can you file for bankruptcy online?
You can, but it’s tricky.
Filing for bankruptcy is far more involved than ordering a two-topping special from Domino’s. It’s also a lot more expensive, especially if you send in the wrong information.
You might want to do it yourself without hiring a lawyer, but you might also need legal advice along the way.
“Most cases are not that complicated,” said Cathy McEwen, a U.S. Bankruptcy Court judge for Middle Florida. “What is complicated is knowing what exemptions to take and what the expenses will be if you take them. There are complicated legal issues.”
Even if you can figure all that out, you might still need a lawyer to file the electronic paperwork.
Here’s a guide if you’re considering bankruptcy as a way out.
Types of Online Bankruptcy
It might pay to know that if you’re struggling with debt you are far from alone. Bankruptcy filings have been almost cut in half since Great Recession, but 747,417 cases were still filed in 2018.
There are two forms of bankruptcy. In Chapter 13, your debts are not wiped out. You are put in a repayment plan that lasts 3-5 years. The advantage is your assets are protected.
Chapter 7 bankruptcy is most commonly used. An individual asks the bankruptcy court to wipe out certain debts. They are paid for by selling off your non-essential property, which means pretty much anything you don’t need to get by (jewelry, Jacuzzi, second car, fur coat), and giving that money to your creditors.
Choosing the right form of bankruptcy is where legal advice could come in handy. But there is nothing preventing you from starting the process “pro se” which means “in one’s own behalf.”
How to File for Bankruptcy Online
You can download bankruptcy forms for free at http://www.uscourts.gov/forms/bankruptcy-forms. Then the fun begins. Here is a five-step rundown of bases you must cover.
1. Take the Means Test
This is a form that determines whether you are broke enough to file for Chapter 7 bankruptcy. It compares your average monthly income against the median income of similar households in your state. If your income is below that average, you automatically qualify.
If your income is above the state average, there are other formulas incorporated into the means test. But they are complicated and will probably require getting some legal advice before proceeding.
Before even bothering with the means test, however, review your financial history. You are not allowed to file for Chapter 7 bankruptcy if it’s been fewer than eight years since you went through a Chapter 7. If you went through a Chapter 13 bankruptcy, you must wait at least six years before filing for a Chapter 7.
2. Receive Credit Counseling
You are required to enroll in bankruptcy credit counseling from an approved agency and complete the course within six months of filing for bankruptcy. The court requires you to have a certificate showing you’ve passed the course.
3. Fill out Bankruptcy Forms
The first form is a Voluntary Petition, Form B1. Other forms will require information on your creditors, contracts, expenditures and specify any debt repayment plans you have negotiated.
4. File a Petition
This will get your case on the court schedule and will stop creditors from pursuing action against you. With Chapter 7, the court will appoint a trustee to meet with you and sell your nonexempt property. Property deemed necessary (home, car, clothing, pensions) will be safe, though your house can be foreclosed on and your car repossessed if you miss loan payments.
5. Attend a Financial Management Course
The list of approved debt education courses is available at Visitjustice.gov. The course must be completed within 45 days of meeting with your trustee and creditors.
Since a face-to-face meeting is part of the process, it is incorrect to assume “filing online” means everything can be done via computer. You can also file over the phone, though you are still required to meet with a trustee.
Do I Need a Lawyer to File Bankruptcy Online?
This is where it gets tricky. California was the first state to have consumer electronic filing and that happened in 2014. Bankruptcy courts across America have followed, but some areas are not expected to have full “do-it-yourself” e-filing until 2020.
So you might need a lawyer to file your case, though you can also hire a bankruptcy petition preparer. Companies offering that service will guide you through filling out forms, but they are prohibited from offering legal advice.
Court employees and judges are also prohibited from offering legal advice. The good news is there are free legal services available through the American Bar Association and Legal Services Corporation.
Among other things, a lawyer can help you:
- Determine whether you qualify for bankruptcy and whether to file a Chapter 7 or Chapter 13.
- Advise you on the tax implications of filing bankruptcy.
- Explain the filing procedures and implications.
- Advise you on what property you can protect from creditors, and whether you should continue paying creditors.
- Provide peace of mind in a confusing and stressful process.
Costs of Filing Bankruptcy Online
Chapter 7 bankruptcy online fees total $335, which breaks down to $245 filing fee; $75 administrative fee; and $15 trustee surcharge. If you have to re-open a Chapter 7 filing, it’s an additional $260.
Chapter 13 bankruptcy fees are $310 with $235 going for filing and $75 for administrative costs. If you have to re-open a Chapter 13 filing, the fee is $235. If you have to convert from Chapter 13 to Chapter 7, the fee is $25.
The fees are the same as they’d be if you filed at the courthouse.
Hiring a petition preparer typically cost about $200, though companies often try to sell you upgraded services that will substantially raise your bill.
If you hire a lawyer, the average cost of filing a Chapter 7 bankruptcy in 2018 was $1,450, according to lawyers.com. The actual cost could vary from $500 to several thousand dollars.
The bottom line is yes, these days it’s almost as convenient to order a bankruptcy as it is a pizza and you can do most of the paperwork yourself.
But just because you can doesn’t mean you should. If you’re not sure what you’re doing, get some help.
It will cost more, but it could save you a lot of money in the long run.