Gathering All the Necessary Facts
Before filing your bankruptcy case, it is important to decide if bankruptcy is your best option. Depending on the specifics of your financial problems, we will gather and discuss a great many facts in your case. We will want to know all aspects of your financial situation and what your desired outcomes are. It may be difficult to discuss all the circumstances you are facing in bankruptcy. However, if you are to take full advantage of the protections offered you under the United States and Arizona bankruptcy laws, we must know everything, including who and what you owe, whether or not you are behind on your payments, and any other financial information.
Bankruptcy is a valuable tool for the consumer debtor. It is also a significant decision to make. It is important to compare bankruptcy with other forms of relief before filing for bankruptcy, as well as to consider both Chapter 7 and Chapter 13 bankruptcy. In order to assist you in making the choice that is in your best interests, as your attorneys we need to have access to accurate and complete information.
The possible consequences of not sharing all the relevant facts with your attorney during your bankruptcy process can be significant. Property may be lost, debts may become nondischargeable, and it is even possible that you could be ineligible for a discharge. It is critical, therefore, to ensure that you disclose complete and accurate information to your attorney.
If you fail to tell us that you owe money on a car loan and that you are behind on your car payments, the company might repossess your car because it wasn’t notified of your bankruptcy. If you haven’t told us about a debt, it’s possible that you will still be responsible for the debt after you receive a discharge. Even if it was a loan that could have been discharged as part of your bankruptcy, you might still be responsible for paying it back. If you are owed a tax refund that you haven’t received, we can plan for how to best handle your bankruptcy. All of these are examples of critical information we need from you when we begin to work on your case.
Certain types of information are frequently neglected when preparing a bankruptcy filing. This article discusses some of the most commonly overlooked information.
One of the ways we ensure that we have all of the information we need to advise you on your best legal options is through our “free workbook” and “documents needed list” available here. https://trezzalaw.com/get-started/ When we sit down at our initial consultation we will want you to have thought about some issues. For example, what are the kinds of debt that are causing the most stress for you or your family? How much income do you have available that is not already set aside for required or unavoidable expenses? What are the biggest assets you have? How did you get debts and is there property that you used as collateral for any of your loans? How close are you to foreclosure or repossession of property?
By having you think about these things prior to our consultation, filling out the workbook and gathering the documents needed, we ensure that we, as your attorneys, have all possible information to best represent you in your bankruptcy case. Remember that we are relying on you to give as much information as you have so that we can discuss your options.
List All Your Property
Some of our clients will forget all the different kinds of property they own. Often financial stress is so overwhelming it can be difficult to remember everything. As you consider your bankruptcy, try to remember all the different kinds of property you own.
Sometimes debtors have bank or credit union accounts that they forget to mention because they have not been used for a long time or because they are joint accounts that the debtor may not consider to be their own property. However, all these accounts are property that should be disclosed in your bankruptcy case.
Also, some accounts have a required minimum balance (such as a share account balance that is required in order to secure a loan or checking account) that debtors do not disclose because they do not have access to it. However, the money in such accounts belongs to the debtor and can make a difference in the bankruptcy process.
A broad category of property that is often difficult for people considering bankruptcy to remember is entitlement to future income or property. This category is challenging to remember and list because it does not represent assets “in the bank” but rather the right to future assets. Some examples include:
- upcoming tax refunds or credits
- accrued vacation pay
- the rights to certain spousal maintenance payments, arrearages, or marital property settlements
- inheritance or life insurance proceeds from someone who has recently passed away or might pass away soon
- future commissions from sales
- security deposits held by landlords or utility companies
- legal claims against third parties
- shares in housing, shopping, agricultural, or other cooperatives
- interests in 529 education savings plans or education IRAs
- entitlements to government grants, such as energy assistance grants
Whether this type of property should be included in the bankruptcy estate depends on many factors. Let us know about all expectations and entitlements to property that you might have so that we can determine how to proceed.
Another type of property that debtors often neglect to report is so-called “pledged goods,” such as items that have been pawned. Finally, insurance interests are often overlooked. If you have life insurance with a cash value or credit insurance that can be terminated in exchange for a “cash out” payment, it is important to disclose this.
List All Your Debts and Liabilities
Just as debtors may not think of certain types of property as being “their own” or relevant to the bankruptcy process, they also may overlook certain types of liabilities. It might seem obvious that you will want to make sure to tell us about all of your debt. However, it is common for clients to forget about some debts they owe. For example, people considering bankruptcy are sometimes unaware that liabilities may remain after property has been repossessed to satisfy a secured debt. Similarly, when a rental property has been vacated (voluntarily or involuntarily) before the end of a lease, this may leave a liability. Let us know about any situation like this that you might be in.
Debts and liabilities related to divorce are also important to disclose. These may include money owed on a property settlement, spousal maintenance or child support obligations, or the debtor’s share of marital debt. If you are divorced or in the process of a divorce, let us know so we can help you list all your liabilities.
Other debts and liabilities that are often overlooked include:
- utility bills that are paid regularly
- long-term payments against an arrearage
- other up-to-date payments
- public benefit overpayments that are being deducted from current benefits
- debts co-signed for others
- property being used as collateral for someone else’s debt
- second and third mortgages
- judgment liens (a lien placed on your property by the courts if you owed someone money and they sued you or as part of a divorce settlement)
Sometimes our clients will want to pay off a particular debt or don’t want to disclose the debt. We often get asked whether or not they can leave it off the list of debts and creditors. Even if you owe money to family or friends, all of these debts must be listed on the bankruptcy paperwork (referred to as “schedules”). When you sign the schedules you are certifying to the court that the information you are providing is complete and accurate. We can discuss strategies and timing for filing bankruptcy no matter what your circumstances.
While it is important to disclose all debts and liabilities, certain types of debt can be especially important during bankruptcy. Be sure to disclose unpaid taxes and recent large purchases on credit so that we can counsel you effectively.
Documenting expenses is as important in the bankruptcy process as documenting income and debts, but it can be very difficult. This is partly because most people do not keep records of their spending on food, clothing, transportation, and other necessities that do not involve a monthly bill.
Often the stress of a lost job or huge medical bills will mean that our clients have been living on a limited budget under that which is necessary and reasonable. Let’s say that you own a home and your income has fallen significantly. Most homeowners in financial distress will choose not to spend money on maintenance. If you have deferred plumbing, electrical repairs, even painting, these are important expenses to take into consideration when determining your expenses.
If you lost health or dental insurance or just haven’t been able to afford the cost of it, you may have made the choice to not go to the dentist or doctor as needed. When you consider your monthly expenses, it is important to include the costs of needed health care appointments.
In order to counsel you through your bankruptcy case, we will need to know not only what you have been spending but also what your reasonable expenses would be. We will help you list these things, but there are many areas of expenses that you should be prepared to discuss with us.
Some types of expenses that are often ignored or underestimated include:
- health, life, auto, and home insurance, depending on your situation
- medical expenses not covered by insurance, including co-pays and deductibles, over-the-counter medications and vitamins
- dental care, including dental work that is needed
- vision care, including exams, glasses, and contacts that are needed as well as contact lens solution
- child care — even if your children are currently cared for by family members, you might feel that they would be better off in paid child care
- home maintenance — include both expected maintenance and unexpected expenses, such as replacing old appliances, heating, and cooling systems, roof repairs that have been put off, painting that is needed; also, if you are unable to physically do yard work or repairs, include the costs of hiring someone
- school expenses such as lunches and uniforms and the reasonable costs of children’s activities including sports, music lessons, and summer camp
- auto maintenance
- home services considered reasonable for the area, such as alarm services or pest control
- personal care, such as haircuts
- baby supplies, such as diapers and clothes
- tax return preparation fees
- pet expenses — if you claim a pet as an asset, you can include reasonable expenses for vet visits and food
- monthly bank account fees, ATM fees, etc.
- birthday and holiday gifts for children
- work expenses, such as uniforms, parking, and so on
- annual auto registration, testing, and licensing expenses
In short, be prepared to discuss with us every expense you have, and we will work with you to determine what is reasonable and should be considered in your bankruptcy case.
While some people find it uncomfortable to discuss every detail of their assets, debts, and expenses, we need this information in order to help you get the best outcome from your bankruptcy case.
The process of Arizona bankruptcy can be difficult and unique for each situation. If you are looking into filing for bankruptcy, it is in your best interest to consult with a competent Tucson bankruptcy attorney before taking any action. I am one of Tucson’s most prolific filers of bankruptcy petitions. That didn’t just happen by luck. My staff and I work hard to make sure our clients have a superior experience with our firm.
Whether it is protecting as much of your property as you are legally allowed to or choosing whether Chapter 7 or Chapter 13 is your best course of action, we can ensure that you make the right choice in your bankruptcy case. If you are considering filing for bankruptcy in Arizona, contact us for a free consultation to find out how we can help.