The Importance of Being Thorough in Bankruptcy

The bankruptcy process can get fairly complicated at times. There is a bankruptcy petition that must be completed accurately and submitted. It can sometimes be more than 60 pages long. There are also document requirements that can be quite extensive. You will need to provide taxes, paystubs, proof of retirement accounts and life insurance, among other documents. Everything must be submitted in the proper form before any deadlines expire. Given these requirements and the complexity involved, it is very important to be thorough while preparing your bankruptcy file.

The bankruptcy petition is filed under federal law, under the penalty of perjury. That means, if you lie on your petition, you could go to jail. But, there is no reason to lie, and this should not be a concern. I always tell my clients, "if you are thorough and honest, there will not be any problems in bankruptcy." I can be confident about this because, as long as you tell me everything, I can anticipate any problems that might arise. If there are any problems, we will wait to file your case until the problems are solved, or look at an alternative to filing. As long as I have all the information as your attorney, I can guide you in what to do.

So, what does being thorough mean in the context of filing bankruptcy? It is very important to tell your attorney about any sources of income, or any real estate or vehicles you own. Income is important because it may determine what type of bankruptcy you can file. Income has a broad definition in bankruptcy, so you will need to tell your attorney about unemployment compensation, Social Security or other government benefits, part-time work and bonuses, and even child support and alimony. If in doubt as to whether some source of money is relevant, tell your attorney. If you have money coming in to you in any form, consider it "income".

Listing all of your assets is also extremely important. Once again, bankruptcy has a very broad definition of "assets." I will review this list with you in Schedule B of your bankruptcy petition. The most important asset to be clear (and thorough) about is any real estate for which you have an interest. This will obviously include your home, but it will also include rental properties, burial plots, campgrounds, mobile homes, and trailers. You must also disclose any fractional interest you have in real estate. For instance, if you have a 1/8th interest with seven cousins on a campground... let your bankruptcy attorney know. If there is one thing that can ruin a bankruptcy case, it is leaving out real estate that you own on your petition.

The same is true for automobiles (including motorcycles) and bank accounts. If you are on a title, deed, or account, let your attorney know. 

It is also important to be thorough in preparing your bankruptcy petition with your attorney because it will save you money. If you leave something out, and your attorney needs to subsequently amend your case, that could cost hundreds of dollars. So, review your credit report closely to make sure none of your creditors is missing. Make sure you provide your bankruptcy attorney with a list of all of your savings and retirement accounts, and life insurance. The more information you provide, the better.

Finally, always remember to ask questions of your attorney. I have found that the vast majority of my clients want to be helpful and forthright. However, some misunderstand a question or requirement or document request. If you have hired an attorney, it is part of his or her job to make sure you understand the process, and your requirements and duties. So, don't be afraid to ask questions!

I go the extra mile to be thorough in preparing my bankruptcy petitions with my clients. Not only is it the right thing to do, it is good, efficient business. If you would like to discuss your situation and schedule a free consultation, contact us to set up an appointment.

Schedule B of the Bankruptcy Petition: Your Personal Property

The bankruptcy petition is a 40 to 60 page document submitted at the time of your bankruptcy filing. The petition provides the US Trustees and bankruptcy court with a lot of information. Specifically, you will list all of your income and expenses, all of your debt, your co-debtors, and some other financial information. You will also need to list all of your property so that it can be exempted and protected from your creditors. Property is listed on a document called "Schedule B".

Schedule B is broken down into more specific sections. In each section, you must list the appropriate property, where it is located, and an estimated current value. The Trustee will review this list at your Meeting of Creditors to verify you do not have any un-exempt property which could be distributed to your creditors. So, what type of property must you list?

Most importantly, you must list any real estate that you own, including your home and any rental properties. You must also list any burial plots or undeveloped pieces of land. The value of your real estate for bankruptcy purposes is what you would likely sell the property for in the current real estate market. It will sometimes be necessary to obtain an appraisal in order to list the value accurately. It should be noted that you CANNOT use assessed tax values to determine the value of your home. It is very important to list all real estate, as you will be asked under oath whether all of your real estate is listed. Failure to disclose all of your real estate could lead to charges of perjury.

A second category of property it is important to list is all of your vehicles. This includes not only vehicles you own outright with a title, but also vehicles with payments or leased vehicles. You must also disclose all other types of vehicles, such as motorcycles, tractors, and boats. To determine the value of a car, we will usually use its Kelly Blue Book value. Boats and tractor values can usually be determined with some online research.

Personal property is also listed in Schedule B. This includes furniture, household items, electronics, clothes, jewelry, hobby equipment, and collectibles. There is no need to worry about losing any of this property, because while it must be listed, it can also be exempted from your creditors, and thus there is no way you will lose any of it. Listing it is mostly a formality, but necessary.

Finally, you must list all financial, retirement, and business accounts. This includes, but is not limited to, retirement accounts (such as 401(k)s, pensions, and IRAs), checking, savings, and credit unions accounts, stocks or interest in a business, and life insurance policies. You must also list any potential lawsuits, inheritances, and insurance or legal claims. These things are not always typically thought of as "property". But, for bankruptcy purposes they must be thought of as such.

Your attorney will review Schedule B with you, line-by-line, helping you to list all of your property, and its value. Property is then exempted and protected from your creditors in Schedule C. When in doubt as whether or not to tell your bankruptcy attorney about a piece of property... tell them. Better safe than sorry. The more accurate you can be, the better.

Contact us if you have any questions about protecting and keeping your property in a bankruptcy. I will be happy to discuss your situation in a free consultation.