Avoiding Surprises in Bankruptcy

Image courtesy of  mustafeez27  (Flickr).

Image courtesy of mustafeez27 (Flickr).

Some people absolutely love surprises and some people don’t.  I fall in the latter camp and try to avoid surprises at all costs.  

I like to always know what’s coming.  I feel safe when I know what to expect.  I relish in routine.

It is the same with the bankruptcy process.  

As an attorney, I want to make sure that there are no surprises and the same goes for you, the debtor.

In bankruptcy, when surprises pop up, there is usually a problem.

Communicate with your Bankruptcy Attorney

As a debtor in bankruptcy, you have certain responsibilities that you must take seriously.  One of the most important things you can do is maintain open lines of communication with your bankruptcy attorney.

Share everything and share often.  Once you have hired an attorney to help you file bankruptcy, don’t make any financial decisions without first consulting your attorney.  

Every piece of information you can provide about yourself and your finances is significant and helps to avoid unwanted surprises.   

Take, for example, a client I represented a few years back.  

Without consulting me, he made the (ridiculous) decision to “cash out” his 401(k) and purchase a vehicle.  He withdrew over $50,000.00 from his retirement account and purchased a luxury car of equal value!

He wasn’t cashing in his retirement account to avoid bankruptcy, he was trying to spend the American Dream.


Competent Representation

When you hire an attorney to represent you in bankruptcy, you expect and are due a certain level of professional representation.  You should never be struck by any surprises.  The communication goes both ways.

Bankruptcy attorneys are not petition preparers.  You hire an attorney to give you legal advice, guide you through a difficult time and ensure that your case has a successful outcome.   

The bankruptcy process should include a detailed consultation as well as ongoing communication and fact finding by your attorney.  

By the time your case is filed with the court, you should have a clear idea of what is going to happen and the likelihood of a successful case outcome  

I cannot tell you how many times I have witnessed debtors appearing in court shocked to find out they are required to turn over their income tax refund.  Attorneys apparently do not inform their clients that when you file bankruptcy in Montana, you are not entitled to a “cash exemption” and must turn a portion of your tax refund over to the bankruptcy trustee.  

This can be quite the unwanted surprise and an unnecessary one that could be avoided or at least, anticipated.

Surprises in bankruptcy are not usually fun.  Make sure you find a qualified attorney, share everything and keep lines of communication open and flowing freely.  

With this formula, your bankruptcy case should be pretty boring, but successful.