Electronic Self-Representation (eSR) Bankruptcy Petition Preparation

eSR: A False Sense of Safety and Competence?

The Problem of Pro Se Filings

There is no doubt that debtors who represent themselves in Chapter 7 and Chapter 13 cases fare worse than those who retain counsel.  In the last published Annual Pro Se Report, the Court indicated:

Pro se cases represented nearly a third of the chapter 7 cases that were dismissed. The percentage of attorney-represented chapter 7 cases that were dismissed, on the other hand, was miniscule (Figure 4). For all chapters, pro se cases were dismissed at an even higher rate, approaching almost half of the dismissed cases for the year.

The Central District of California Bankruptcy Court received the most pro se filings in the nation. In 2015, pro se bankruptcy filings in the Central District were double the second-ranked court, the Middle District of Florida. Many commentators (and judges) have indicated that this significant number of filings done without counsel is problematic. Judge Mund, as long ago as 1994, commented that the pro se litigants were taking court time and staff attention that could be better spent on routine court operation.  One legal commentator commented, in response, that Judge Mund's comments brought a new perspective to his thinking.

The usual complaint that most people have about pro se litigants is that the litigants themselves suffer—they are not getting as good a service as if they had been represented by a lawyer. What you are providing is really an unusual kind of twist—the whole system is suffering because of the pro se litigants
Hon. Arthur B. Briskman, Hon. Leif M. Clark, Hon. Geraldine Mund, Hon. Alexand et. al., Consumer Bankruptcy: A Roundtable Discussion, 2 Am. Bankr. Inst. L. Rev. 5 (1994)

While bankruptcy attorneys can electronically file cases, pro se debtors, before 2014, could not. Should pro se debtors be able to file cases electronically?  Who does this really help? Who does it hurt?

Enter eSR

On March 31, 2014, the Central District of California became the first of three test courts to install the electronic Self-Representation (eSR) software successfully in the live environment. eSR is an online tool intended to help individuals prepare a chapter 7 bankruptcy petition when they have decided to file bankruptcy without an attorney. After exploring the eSR system from a pro se debtor's perspective, I am not convinced it advances the rights of debtors or will assist the Trustees or the Courts.  In fact, the availability of what appears to be a simple online filing system may be seen as an endorsement of self-representation. It also encourages debtors to undertake significant legal decisions, as described below,without counsel.  The Central District's apparent embrace of pro se filing and self-representation provides a false sense of security to debtor's who are determined to save $1,000 to $2,000 at the risk of their bankruptcy filing.

The United States federal courts ordinarily discourage self-representation.  The right to proceed without counsel is certain and clear. Bankruptcy Rule 9010(a) authorizes a debtor to appear pro se. Under most circumstances, it is a constitutional right to proceed in many legal matters without counsel. That doesn't make proceeding pro se a good choice. In the criminal context, a long line of decisions limits that right and prevents those who are subject to great jeopardy from making a foolish decision. While bankruptcy matters are not as fraught with jeopardy as criminal trials, the stakes in bankruptcy are high and the consequences for mistakes are significant.

Because the “dangers and disadvantages of self-representation during trial are so substantial,” a court must make a “searching or formal inquiry” before permitting a waiver of the right to counsel (although no such inquiry is required for the correlative waiver of right to self-representation).
U.S. v. Pryor, 15-2123, 2016 WL 6872043, at *4 (6th Cir. Nov. 22, 2016)

The Federal Judicial Center, in Assistance to Pro Se Litigants in U.S. District Courts (2011), speaks clearly.  "Given the complexity of litigation, it seems that the service that would most help pro se litigants is assistance of counsel."  I advance the argument that any action by the courts that directly or indirectly appears to approve self-representation is a disservice and leads debtors away from hiring counsel.

The Central District website, despite being replete with information for debtors who want to file without counsel, does nevertheless warn those seeking to file that they should instead seek counsel.  The following warning is found on the Central District website.

Bankruptcy has serious long-term financial and legal consequences and hiring a competent attorney is strongly recommended.    The Bankruptcy Court is not permitted to provide legal advice.  Individuals filing for bankruptcy without an attorney are still responsible for knowing and following all of the legal requirements. Low or no cost legal resources are available in all divisions of the bankruptcy court.

Another warning is found on the US Courts website.

Filing personal bankruptcy under Chapter 7 or Chapter 13 takes careful preparation and understanding of legal issues. Misunderstandings of the law or making mistakes in the process can affect your rights. Court employees and bankruptcy judges are prohibited by law from offering legal advice. 

Much more could be done to steer debtors away from seeking to "go it alone".  As Judge Mund indicated in 1994, encouraging or allowing pro se filings is expensive in time and money for the entire judicial system.  It leads to much higher rates of dismissal.  Finally, I would argue, allowing or encouraging self-representation leads to mistakes that hurt those seeking a fresh start through bankruptcy.

How Does eSR Perform?

A PDF of a selection of the screens presented to a pro se debtor filling out the Petition using eSR is found at this link.  The system appears to be a user-friendly web-based data entry system.  Some of the fields are dependent on others. That is, responsive fields further in the questionnaire are presented only in response to certain earlier answers. There are at least two areas where the average debtor, despite links to further information, would be at a serious disadvantage or a complete loss.

The first occurs on the screen labeled "Schedule C - Property Claimed as Exempt." The pro se debtor is expected to enter the statutory citation for each exemption claimed. This means that the debtor would need access to a description of the exemptions, information on how to select exemptions, and the ability to calculate the right amount of each item of property to exempt. The only help provided is found through links to the underlying statutes.

The next area of difficulty is likely to be the means test. No direct guidance is provided on the figures a debtor is to use in the means test. Instead, the eSR system links to the Department of Justice website which links to various census data tables and other national standards. Many practitioners struggle with certain aspects of the means test. Expecting a pro se debtor to complete the means test without any software that calculates totals, multiplies or adds various fields, carries forward secured debt, and requires the debtor to input national standards is idealistic or unrealistic.

I encourage you to review the screen progression either in PDF or in PowerPoint

The Final Product

You can follow this link to review a PDF copy of the "sample" eSR petition that results from using the system.  Of course, the paper copy is not the end product. The debtor is allowed to file electronically.  That is the whole point. 

One aspect of eSR filing is quite different from that done by attorneys. The forms that attorneys ordinarily scan and file must be delivered to the appropriate court. Payment is also dropped off by the debtor in person at the courthouse. 

The following forms with original signatures must be delivered or mailed to the Bankruptcy Court after submitting your petition electronically: Statement About Your Social Security Numbers (Form 121), Declaration Regarding Electronic Filing, Notice of Available Chapters (Form B201), Statement of Related Cases (LBR Form F1015-2.1), Declaration About an Individual Debtor’s Schedules (Form 106Dec), Declaration by Debtor(s) as to Whether Income was Received From an Employer within 60 Days of the Petition Date (LBR form F1002.1), Verification of Master Mailing List of Creditors (LBR form F1007-1), Bankruptcy Petition Preparer’s Notice, Declaration and Signature (Form 119), if applicable, Disclosure of Compensation of Bankruptcy Petition Preparer (Form B2800), if applicable, and any other documents/attachments required to file your bankruptcy case.  

Those filing for bankruptcy protection need to be encouraged to obtain competent and reasonably priced consumer bankruptcy counsel. Most of our clients would qualify for hardship, reduced fees, or even pro bono representation if they were seeking representation in a field other than bankruptcy. But consumer bankruptcy attorneys serve precisely the population that can least afford representation. Despite this fact, hiring a bankruptcy attorney is ordinarily one of the least expensive forms of legal representation with the greatest result for the funds expended. 

I would hope the courts and the consumer bankruptcy bar would be united in strongly encouraging debtors to obtain counsel rather than facilitating options that communicate to debtors that competent bankruptcy counsel is, at best, optional.