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. Parts of the bankruptcy process – meeting with creditors and court hearings – still must be done in person, but a great deal of the paperwork and educational requirements can be done online with help from a bankruptcy attorney or a non-attorney bankruptcy petition preparer.
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 752,160 cases were still filed in 2019.
There are two major forms of bankruptcy for individuals. 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, accounting for approximately 63% of cases. An individual asks the bankruptcy court to wipe out unsecured debts like credit cards, medical bills and maybe personal loans. They are paid for by selling off your non-essential property, which means pretty much anything you don’t need to get by (jewelry, art, stamp collection, 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 six-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 bankruptcy 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 like InCharge Debt Solutions 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 before it will allow you to file for bankruptcy.
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 “341” Creditors’ Meeting
The creditors’ meeting, called a 341 meeting, is where the bankruptcy trustee appointed to your case will ask you questions under oath about your financial situation. Specifically, the trustee will verify your identity, ask about the accuracy of your bankruptcy petition and schedules and give you the chance to reveal any changes that have taken place since you filed your documents.
Creditors are allowed to ask questions about your financial situation, but this rarely happens. In most cases, the meeting will take less than 10 minutes.
6. Attend a Financial Management Course
The list of approved debt education courses is available at Visitjustice.gov. InCharge Debt Solutions is an approved agency with our own online bankruptcy course. 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. But it has not caught on. As of 2020, only one other district bankruptcy court has implemented electronic self-representation software.
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.
Bankruptcy Attorney Fees
Hiring a bankruptcy attorney can be costly. So can not hiring one. “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.”
For Chapter 7, costs usually range $500 to $3,500, which must be paid before you file because attorney’s fees could qualify as part of the debt discharged in a successful filing. 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.
For Chapter 13, costs typically range from $2,500 to $6,000, but you don’t usually have to pay the entire fee up front, paying some of it through your debt-repayment plan.
Costs of Filing Bankruptcy Online
Chapter 7 bankruptcy fees totaling: $335
- $245 filing fee
- $75 administrative fee
- $15 trustee surcharge
*If you have to re-open a Chapter 7 filing, it’s an additional $260.
Chapter 13 bankruptcy fees total: $310
- $235 filing fee
- $75 administrative fee
*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.
Hiring a petition preparer typically cost about $200, though companies often try to sell you upgraded services that will substantially raise your bill.
Should I File Chapter 7 or Chapter 13 Bankruptcy Online?
To be clear, the question is not just which type of bankruptcy is appropriate to your situation. It’s whether bankruptcy is right for you – period.
It’s a complicated process, and you should consider speaking to a credit counselor to determine if there’s another way. Nonprofit consumer credit counseling organizations that can negotiate more favorable terms with creditors, and it’s possible that a debt management plan, debt consolidation loan or debt settlement could be a better solution. You can review your options for free by speaking to a credit counselor.
If bankruptcy is your best course of action, InCharge offers bankruptcy court-approved bankruptcy education courses through PersonalFinanceEducation.com.