When you meet with a bankruptcy attorney for the first time, you may be shocked by two things: (1) the lawyer will likely never ask you why you are filing bankruptcy or what happened to get you here, and (2) the lawyer will ask for a ridiculous amount information when you haven't even made the decision to file bankruptcy yet. This guide will walk you through what to expect at your initial consultation and why we ask you these things.
A REVIEW OF YOUR INCOME TO DETERMINE WHETHER YOU QUALIFY FOR BANKRUPTCY.
A bankruptcy lawyer will need to review your income. He or she will need to look at this information from two points of view. First is your gross income in the last six months and second is your current income. If your monthly gross income during the six months prior to filing is less than the median income, then you qualify for chapter 7 under the "Median test." If not, then you may still qualify, but the full "Means test" must be invoked to determine special circumstance or extraordinary expenses. If you fail the "Median Test" and the "Means Test" you can still file chapter 13, but chapter 7 is likely not an option. Sometimes your earning history is higher or lower than your current income. A lawyer can discuss timing and how that may change the calculations to your advantage. Waiting too long to see a lawyer can limit the lawyer's ability to manipulate timing to your advantage so it is wise to visit a lawyer as soon as you suspect that bankruptcy may be in your future.
A REVIEW OF YOUR EXPENSES.
Do you regularly tithe to your church? What are your mortgage and car payments? Do you pay for your adult child's car and insurance payments? Do you pay for the care of your aged parents? Even if you qualify for bankruptcy under the Median Test or the Means Test, your lawyer will need to review your budget to determine whether you have money left over at the end of the month. If that were the case, you probably would not need a bankruptcy lawyer, but a lawyer will need to review your budget to make sure that where you spend your money is what the Courts would agree to be reasonable. The appearance of extra money at the end of the month as the result of disputed expenses may hinder your chances at discharge or increase a Chapter 13 Plan payment.
A REVIEW OF YOUR ASSETS.
Most bankruptcy lawyers offer a free consultation for potential clients to learn about their options and even to interview the attorney. Prior to the meeting or during the meeting you will likely be asked to provide a list of every single asset that you own, from sofas to bank accounts. This tends to be a big point of contention for many people. Why should you divulge such private information to an attorney that you haven't even decided to hire yet? The answer is simple. While the lawyer's first job is to determine whether you are a candidate for bankruptcy, his or her most important job is asset protection. You hire an attorney to help protect your assets and to warn you if an asset may be taken in bankruptcy. Even if you qualify, you may not choose to file if a possession with high sentimental value could be lost. Knowing these concerns, the lawyer can then help to strategize options for protecting that asset or even discuss a Chapter 13 bankruptcy for asset protection.
A REVIEW OF YOUR FINANCIAL TRANSACTIONS.
There are many things that are perfectly benign in the real world, but can be devastating in bankruptcy. For example, repaying your grandmother the $1,000.00 that she loaned you for rent last month is considered a "preferential payment" and can result in your grandmother being sued by the Trustee in bankruptcy. Your lawyer will review your one to two year history of transfers, payments and closed financial accounts, among other things, to search for potential problems and then to strategize with the aim of protecting you and your loved ones.
A REVIEW OF YOUR CREDITORS.
Do you have the type of debt that can be discharged in bankruptcy? Will Chapter 7 or Chapter 13 better serve you with regard to your particular debts? These are the type of questions your lawyer will be asking him or herself while reviewing your debts. The names and amounts are typically less important than the type of debt. You should bring a credit report, copies of bills or even a handwritten list to your consultation.
FULL DISCLOSURE IS IMPORTANT!
If I had a nickel for every time a client explained to me that there is "no paper trail" for this transaction or that family heirloom, I would be retired by now. My stock answer is that Bankruptcy is filed in Federal Court and you sign the petition under the Penalty of Perjury. Your grandmother's ring is not worth prison. Even she would tell you that. Provide your lawyer with complete answers to all questions and make your decisions with all facts in front of you. If your initial consultation leaves you feeling rushed or your questions were not fully answered, then do not hire that attorney. Meet with lawyers until you find the right one. This is one of the most difficult decisions you will ever make and you should be well represented in the process. One final note. Why won't we spend much time on the circumstances that lead to your financial troubles? In bankruptcy, the focus is on your present ability to repay your debts - not what happened to get you here. Good luck!
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