By Columbia-Lexington Bankruptcy Attorney Lex Rogerson
Filing a bankruptcy case is an information-intensive process. Expect any bankruptcy lawyer to ask a lot of questions and require a lot of numbers.
Last week a lady called my office seeking bankruptcy advice. To prepare for her first visit to see us, my paralegal (as she always does) asked the caller what real estate she owns. She answered that she owned some property jointly with some family members. When Cindy asked for the property address, the caller became obviously uncomfortable, saying she did not want to involve her family.
Cindy explained that a bankruptcy would not necessarily affect them, and that we needed the information to advise her about any such effects, but the caller stonewalled. A few moments later, she hung up — giving up on free legal advice from a bankruptcy specialist with 30 years’ experience.
That’s unfortunate, if for no other reason than that any bankruptcy lawyer would need exactly the same stuff we were seeking in order to give this woman competent advice.
If you consult a bankruptcy lawyer, assume from the start that you will be asked for complete and detailed information on your debts, assets, income, and expenses. Why? Two reasons.
First, the simple reason. Anyone who files bankruptcy has to disclose all that material in documents filed with the court. Over a million people filed bankruptcy in 2013, and every one had to make these disclosures. If they refused, their cases were dismissed.
There are significant penalties, both in the bankruptcy process and potentially under criminal law, for those who fudge on their disclosure requirements. Right here in South Carolina, a former all-pro NFL defensive back got a federal criminal conviction when he failed to disclose some property. A former USC president went to federal prison. That’s serious stuff, so full disclosure is the only sensible route. And any lawyer on earth will tell you that if something is eventually going to come out, it’s best to tell the lawyer about it from the beginning.
Second, the more urgent reason. A bankruptcy lawyer simply can’t advise a client about the benefits and risks of the various alternatives without knowing these things — any more than a doctor can reach a diagnosis without listening to and examining the patient.
So what does the lawyer need to know? Let’s start with debts. Most unsecured debts can be discharged, but a bankruptcy lawyer can identify one that might not be dischargeable only when he knows the particulars. And secured debts are treated quite differently than unsecured. So the details matter.
How about asset information? In chapter 7, a trustee is responsible for finding out if the debtor owns anything that is not exempt and, if so, liquidating that asset. Although most people who file do not lose anything, a lawyer can’t tell whether something is at risk without knowing facts like the kind of property involved and the value. In chapter 13, by contrast, assets are not liquidated, but the debtor’s property can affect the amount that creditors must receive under the debtor’s plan. So complete information is on property is important no matter which way you go.
Income and expenses are also vital. Congress has enacted abuse rules to disqualify debtors from filing chapter 7 if they have enough disposable income to pay a significant percentage of their debt. And in chapter 13, disposable income determines how much the debtor must pay unsecured creditors and therefore impacts the overall plan payment that will be required. Like debts and assets, income is important whether you are considering chapter 7 or chapter 13.
Over the years, we have increasingly tried to reduce the amount of information-gathering a client must do before getting our advice. We’ve settled on a system that requires only minimal effort before the first visit. But those who decide to file must be prepared to spend a good deal of time later assembling figures, addresses, and documentation.
If your bankruptcy lawyer doesn’t ask you for a mind-numbing amount of information, that’s a good sign you’ve gone to the wrong lawyer — one who either doesn’t know or doesn’t care about the importance of details. So if your lawyer asks you for a lot of numbers and paperwork, take that as some indication he’s competently looking out for your interests.