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Littwin on Bankruptcy Without a Lawyer

posted by Bob Lawless

A few weeks ago, Katie Porter noted the release of the new book, Broke: How Debt Bankrupts the Middle Class. We are trying to feature posts from the authors of Broke about their contributions. Today's post comes from Professor Angela Littwin of the University of Texas School of Law and a founding member of Credit Slips:

After a long absence, I am temporarily back on Credit Slips, blogging about my contribution to Broke, the new book edited by Credit Slips’ own Katie Porter. My chapter is about consumers who file for bankruptcy without a lawyer (known as filing “pro se”). The chapter is entitled The Do-it-Yourself Mirage: Complexity in the Bankruptcy System. which should give you a pretty good idea of my take on the matter. Using data from the 2007 Consumer Bankruptcy Project, I found that pro se filers were significantly more likely to have their cases dismissed than their represented counterparts. My most interesting result deals with education. My analysis suggests that consumers with more education were significantly more likely than others to try filing for bankruptcy on their own, but that their education didn’t appear to help them navigate the process. Pro se debtors with college degrees fared no better than those who had never set foot inside a college classroom. I argue that bankruptcy has become so complex that even the most potentially sophisticated consumers are unable to file correctly.

This bad news, however, is not the entire story.

As I wrote my chapter, I started to think about how remarkable it was that the consumer bankruptcy system processes more than a million cases per year with relatively little fuss. Yes, things almost certainly got worse in the wake of the 2005 amendments. (When I compared data from the 2001 and 2007 iterations of the Consumer Bankruptcy Project, I found that the percentage of dismissals had increased between the two years and that the 2007 debtors were plagued by motions to dismiss on technical grounds.) But my background is in poverty law, and when I compared consumer bankruptcy to other programs that serve financially struggling individuals – such as welfare or disability benefits – the bankruptcy system started to look pretty good.

The more I thought about it, the more I became convinced that the reason consumer bankruptcy worked so well might relate to the very problem I had started off with: the role of lawyers. Being unable to afford a lawyer puts some consumer debtors at disadvantage in our current bankruptcy system, but the fact that most debtors have lawyers – and paid lawyers, at that – may partially account for the fact that consumers don’t emerge from bankruptcy feeling abused and humiliated, as they do with the poverty programs. I called this observation “the affordability paradox” and expanded on it in a law review article by that name.

Comments

I vented my spleen on this on my blogs here and here. It's targeted at Chapter 13 issues, but the problems are growing in 7s. Too many debtors will get the door slammed in their faces unless they are represented by someone who has access to The Secret Circle.

Any URL should automatically be converted into a link. There is no need to use the "" tag.

Interesting comments concerning pro se filers.I will provide two another issues seldom addressed concerning BAPCPA.The consumers who needed access to filing bankruptcy were left behind to eventually be charged off for further collection efforts and/or sold to a debt buyer. However, there was another group called "pending bankrupt" where an attorney was hired and an installment payment agreement signed until such time the attorney fees were paid in full and subsequently the case was filed. In my experience pre BAPCPA, once an attorney was hired the bankruptcy filing usually occured within two months or less. Post BAPCPA repayment of attorney fees could take six to ten months. Wonder how many debtors stopped the repayment of attorney fees, where they ended up, and where the paid fees went.Both consumers and creditors lost equal balance regardless of who to blame when BAPCPA became law. One can argue the economic downturn has not helped but I believe consumers are going to file anyway and within any means available because of income and not whether the law says X or Z. The solution? Change the existing law and try to reduce total reliances on theory or the think tank philosophy approaches, data studies that are flawed, and realize that it serves no interest of either side to be left holding the bag.Hopefully we can get it right after at least two significant tries and allow consumers to seek bankruptcy relief who need it and at a reasonable cost from attorneys. The looser since October 2005 is the consumer. To accept those who cannot afford to pay attorney fees and enter bankruptcy unprepaired or seek cheaper alternatives to file bankruptcy, or just ride the debt collection storm doesn't say much for anyone, in my opinion.

After Knute Rife's comment, I tried to turn on full HTML in the comments. That ended up "freaking out" the rest of the formatting on the web page. (This is a technical description.) The problem seems to be buried in the tubes that are Typepad.

Hence, I had to turn off full HTML in the comments. Links should still automatically convert to HTML, however.

Can you file your own bankrutpcy without a lawyer?

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

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