Every year, several hundred New Mexicans attempt to play lawyer in U.S. Bankruptcy Court by filing do-it-yourself petitions for bankruptcy court protection.
It is a daunting task given the legal complexities and long-term financial consequences of a bankruptcy, but one that will become at least a little easier within the next year.
New Mexico is one of three bankruptcy courts selected nationwide to participate in the Pro Se Pathfinder Project, an e-filing program for do-it-yourself bankruptcy filers that’s been compared to Web-based tax preparation software. Pro se means “for himself” in Latin, but better translates as “do it yourself.”
“The system will be designed with graphics, audio and video,” said Norman H. Meyer Jr., clerk of the bankruptcy court for the District of New Mexico. “We want this to be more user friendly with a sort of Turbo Tax approach.”
Pathfinder will guide the do-it-youselfer through the paperwork, moving the computer cursor through the multitude of requests for information and documentation, he said. A box containing an explanation of what’s wanted will pop up as the cursor hits each request. The explanations will be in plain language, not legalese.
Details are still being worked out, although Meyer said, “Our goal is to have it out to the public by the end of the year.”
New Mexico, where roughly one out of every 10 bankruptcy petitions already is pro se, was chosen for the initial rollout of Pathfinder as representative of a rural state, Meyer said. There’s a scarcity of consumer bankruptcy attorneys in much of the state, which saw 6,569 bankruptcies filed in 2010.
“As a web-based application, it can be brought up in Jal or Clayton,” he said, adding that some planners originally wanted to offer Pathfinder through a kiosk in the lobby of the court clerk’s office in Albuquerque. “We said, in our district, we needed it accessible over the web.”
Also participating in the rollout is California’s central judicial district — the Los Angeles area — where one-third of all bankruptcy petitions are pro se; and New Jersey, where 8 percent are pro se and access to courthouse services is comparatively convenient.
Entitled by law
Individuals are entitled by law to represent themselves in a bankruptcy proceeding and most do it because they don’t have the money to pay a lawyer.
In Albuquerque, a consumer can pay in the range of $800 for an uncomplicated petition for Chapter 7 bankruptcy court protection, where most kinds of debt are erased, according to several local bankruptcy attorneys. A Chapter 13 petition, where an effort is made to come up with a plan to repay at least some of the debt, can run as high as $4,500 depending on the circumstances, according to a veteran judge in such cases.
Although more accommodating to do-it-yourselfers in the past, bankruptcy law underwent a complicated overhaul with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
The act imposed stricter requirements in documenting income and expenses. Credit counseling and taking a class in personal financial management became mandatory. Chapter 7 filers are required to fill out the so-called “means test,” a tax-like formula to determine disposable income.
The clerk’s page at the bankruptcy court’s website for New Mexico has links for pro se filers to 11 pages of instructions and 151 pages of forms and resource materials. For example, the statement of financial affairs alone asks for detailed information in 26 categories.
There are free resources available to the average do-it-yourselfer. Most consumer bankruptcy attorneys offer a free consultation. The bankruptcy law section of the State Bar of New Mexico holds a free consumer debt and bankruptcy workshop once a month in Albuquerque and Las Cruces.
U.S. Courts, basically the judicial branch of government, officially discourages do-it-yourself filings for bankruptcy because of the attention to detail required in a petition.
Taking it a step further, U.S. Courts also caution against the use of “petition preparers,” who don’t have a law degree and are prohibited by law from providing legal advice. Considered a cheap alternative to a lawyer, petition preparers are just supposed to guide a debtor through the paperwork.
“That’s a real can of worms because basically no petition preparer just prepares,” said Albuquerque bankruptcy lawyer Bill Davis. “Inevitably, they start providing advice.”
N.M. by the numbers
Of the 6,569 bankruptcies filed in New Mexico last year, 593 were tagged pro se in court records, according to the clerk’s office. About three-quarters of the pro se petitions used a petition preparer. Only 23 of the pro se petitions had been dismissed as of mid March, for a success rate of more than 99 percent.
The success rate is shockingly high, given the official discouragement of do-it-yourself filings, although Davis said there’s more to it. “The real question is, ‘Are you sure you got the best bankruptcy available to you?’” he said. “It’s not whether you can prepare and file a petition, but how you come out of bankruptcy in the end.”
The first consideration is that bankruptcy law is not set in stone, he said. The 2005 act has often been described as having confusing wording in some passages and technical problems in others. Judges and lawyers have spent the last five years working out the details.
The resulting case law continues to change what’s in the act itself and what’s in the instruction forms, Davis said. “Case law is important and lawyers know how to use it. The pro se filer runs into the problem of not being up to date.”
Davis cited the “exemptions” component of a bankruptcy petition — the stuff that a debtor gets to keep — as an example of where a do-it-yourself filer can answer the questions and fill in the blanks to the court’s satisfaction, but hurt his or her chances of coming out of bankruptcy in the best possible financial shape.
The Pro Se Pathfinder Project will not offer legal advice, and thus replace an attorney, but simply serve as a guide through the paperwork. It will be offered as a free alternative to petition preparers, who operate outside the court system.
“I don’t think the attorneys feel they will lose any business that they want,” said Albuquerque bankruptcy lawyer Tom Walker, who is chairman of the State Bar’s bankruptcy law section. “The more realistic consequence is that Pathfinder might give some individuals more confidence that they can do it themselves.”
Do-it-yourself bankruptcy program coming to N.M. WHAT: N.M. chosen for Pro Se Pathfinder Project
Photo Credit – journal file
Cutline – The Office of the Clerk of the U.S. Bankruptcy Court is in the Dennis Chavez Federal Building and Courthouse in Downtown.
Call the reporter at 505-823-3919
