Each state has created a list of assets considered to be protected or "exempt" from creditor attachment or seizure, and thus, from your trustee in bankruptcy. Your attorney should know this list backward and forward and should be able to determine, upon a review of your assets, which items are not exempt in your bankruptcy. These non-exempt assets can be seized and sold by a Chapter 7 trustee and can drive the Plan payment higher in a Chapter 13 bankruptcy.
If I have non-exempt assets, what options do I have?
Your attorney must advise you that these items are non-exempt and guide you through the five possible strategies for handling the non-exempt asset, such as making an offer to the Chapter 7 trustee or liquidating the asset under legally permissible conditions prior to filing.
Do I have any preferential payment issues?
A preferential payment is a payment to one creditor at the expense of or in absence of payments to other creditors. Put more simply, you had $1,000.00 tax refund and you gave it all to Mastercard who has been calling you all hours of the day and you wanted them off of your back - or you paid your Grandmother who used her social security check last month to help you with rent. The position of the Court is that if you had $1,000.00, then it should have been divided amongst all of your creditors and not given to just one. Payments such as these can lead to a lawsuit against the creditor who was paid. This is fine if it is Mastercard, but not if it was your grandmother.
Are any of my transfers in the past two years possible fraudulent transfers?
You probably have tried to avoid bankruptcy and in doing so may have had some yard sales or sold assets to raise money to pay bills or even to get by. This is permissible in bankruptcy and will raise no problems, unless the items sold were at less than fair market value or if the funds have not been received and spent prior to filing. Any transfers not meeting these requirements may be deemed fraudulent and unwound by a Chapter 7 trustee. All transfers in the two years prior to filing should be reviewed by your lawyer for possible problems.
Do I pass the means test? In other words, do I qualify for chapter 7?
Your attorney should review your income and review your paystubs at the Initial Consultation to determine whether you qualify for Chapter 7 bankruptcy. If your circumstances may change prior to filing, then timing could be an issue to be considered. It is important to know where you stand today in the eyes of the Court and where you will be once you are ready to file.
If a chapter 13 has been recommended, what is the reason?
There are five typical reasons for filing a chapter 13. These are: saving your home from foreclosure, saving your car from repossession, a prior Chapter 7 bankruptcy, failing to qualify for Chapter 7 due to high income, and non-exempt assets. If a Chapter 13 has been recommended, then you should ask why. A typical attorney's fee for a chapter 7 will range from $1,500 to $2,500.00 depending on the complexity of the case and the experience of the lawyer. An attorney can collect $2,000.00 more in fees from a Chapter 13 case and can require less money down by collecting the fee in the Chapter 13 payment plan. Some firms are know for pushing Chapter 13 cases in order to bring in higher fees and so that they can appear to charge less by funneling a large portion of the fee through the Chapter 13 Plan. This ability to file with little money down helps these attorneys "make the sale." Your decision to file Chapter 13 should be based on legal analysis rather than the lawyer's profit margin
How many 707b objections have you handled? What were the circumstances and who prevailed?
Most lawyers will encounter an objection to a Chapter 7 case over the course of representing clients in bankruptcy. A 707b objection is typically an objection by the United States Trustee alleging that the Chapter 7 filer should be in Chapter 13 due to making too much money for Chapter 7. You should be able to get a good feel for you potential lawyer with this question by his or her reaction. Is he/she offended by your question? Does he/she know what 707b refers to? Was the answer a reasonable one? (As an aside, my answer is that I have handled a handful of these objections, but in almost every one of these cases my clients were advised that they were on the border with their income and expenses and voluntarily took the chance at the Chapter 7. I have had good success in defending these as I knew it was coming and had my response/explanation of special circumstances ready to go.)
If a chapter 13 is recommended, what is the estimated monthly Plan payment?
I am astounded that some attorneys fail to provide an estimated Chapter 13 payment at the Initial Consultation. Although an exact figure is nearly impossible to provide without six months of paystubs and an hour of work, I can provide a reasonably accurate range for my client before they leave my office with a basic budget, a few paystubs and a review of the creditor list. Failure to give you an estimated payment amount is probably a sign of inexperience or a sign that they don't want to take the time spent to provide it for you.
If a chapter 13 is recommended, how many months will it last?
The length of a Chapter 13 bankruptcy is dependent upon passing the Means Test (although it is not called "Means Test" in Chapter 13 - it is simply Form B22C). You should not be locked into a 60 month plan if it is not necessary. You also will want to be able to calculate how much you will pay overall in the Chapter 13 to unsecured creditors and the number of payments is necessary for this calculation.
How much are your fees and how will you be paid? Will there be any additional fees?
Before your case can be filed, you will need all of your Chapter 7 fee paid in full. An attorney cannot collect legal fees after filing your Chapter 7 bankruptcy without violating the laws of the bankruptcy that he/she just filed for you. I would suggest that you review the timing of the payments and then the timing of the filing so that you are fully aware of what is expected of you and what you can expect of your attorney.
Bonus Question: Are you a lawyer?
A number of law firms have made a lot of money by paying only one or two attorneys to handle an enormous caseload. How do they do this? They hire support staff to handle almost everything. In fact, some firms will schedule new clients to meet with support staff rather than lawyers at the first meeting. It makes sense... lawyers can be kind of dry and often full of themselves. Rather than searching for a lawyer with personality and legal experience, these firms can hire a charming salesperson for a lot less money to say what you want to hear in order to gain your business. I do not object to support staff and I would be lost without my paralegal and assistants, but your first consultation requires LEGAL analysis, which cannot and should not be done by a salesperson.
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