Without a doubt, the most important time you will meet with your bankruptcy attorney is the first time you meet with your bankruptcy attorney. During that first meeting, you, the potential new client, and the attorney should develop a rapport, outline goals and expectations, and review solutions.
A thorough, productive first meeting will lay the groundwork for comfortable, effective, and predictable representation. A rushed or inadequate first meeting handicaps representation – both from the client’s and attorney’s perspective. It can lead to misunderstandings, mistakes, and mutual resentment.
How can I prepare for my first meeting with my bankruptcy attorney?
The answer is that you can maximize the benefit of that first meeting – and greatly increase your likelihood of a satisfying experience with your attorney – by coming to the meeting prepared to answer your bankruptcy attorney’s questions.
So, what is your bankruptcy attorney going to ask you? To answer that, think of your bankruptcy attorney as a problem-solver who is going to assess your financial situation and then apply your facts to the rules, limitations, and considerations of the bankruptcy code, before arriving at a solution.
Hopefully, your bankruptcy attorney comes into your first meeting knowing the rules, limitations, and considerations of the bankruptcy code. In that case, then, you just need to be able to describe your financial situation in a manner that allows your bankruptcy attorney to apply it to the rules, limitations, and considerations.
What Your Bankruptcy Attorney Needs to Know
Your bankruptcy attorney needs to know about your assets, your debts, and your income and expenses.
Your bankruptcy attorney needs to know about your assets because when you file bankruptcy, all of your assets (with a very few exceptions) are placed in a bankruptcy estate. You are then allowed to exempt certain assets and remove them from the bankruptcy estate, beyond the reach of your creditors.
If you have assets that you are unable to exempt, either because there is no exemption for that particular type of asset or because there is a limited exemption and the value of the asset exceeds that limit, those assets remain in the bankruptcy estate and are used to pay your creditors. How that is done depends on the chapter of bankruptcy and deserves its own discussion.
Your bankruptcy attorney will know the exemptions, but you must be able to describe what kind of assets you have and their value. You must think of assets, broadly, too. There are the obvious things, like houses, cars, furniture and appliances, bank accounts, etc.
Accounting for the Less-Obvious Assets
But there are other, less obvious assets, that are no less valuable and must be exempted if they are to be protected from your creditors through bankruptcy. Think of things like annuities, 401(k)s or IRAs, life-insurance policies with surrender values, or trusts that you may be a part of. Or patents, copyrights, or other intellectual properties. Heck, even things like your right to sue someone for money, maybe for a breach of contract or medical malpractice or car accident, are your assets and are property of the bankruptcy estate.
In reality, the exemptions are generous, and nearly all filers can exempt and keep all of their assets. But your bankruptcy attorney should spend a great deal of time asking you about assets, no matter how ridiculous the questions may seem, because at the end of that first meeting, your bankruptcy attorney should be able to tell you whether you have any non-exempt assets that require further discussion or if you, like the majority of filers, are able to exempt and keep all of your assets.
How to answer your bankruptcy attorney’s questions about assets
Write down the values of your home or any other real estate and write down the values of any loans or mortgages you might have against your home or other real estate. Know what kind of balances you carry in your bank accounts.
For less tangible assets, like lawsuits or inheritance issues, bring the names of any professionals (attorneys, accountants, etc.) involved as well as any pleadings (lawsuits, for example) or other documents you may have in your possession.
There may still be additional information your bankruptcy attorney may request after that first meeting, but you’ll be better prepared to answer your bankruptcy attorney’s questions about assets.
Three Kinds of Debts
Oddly enough, of the three things, assets, debts, and income, your bankruptcy attorney will likely spend the least amount of time discussing your debts. At this stage, the character or type of each debt is more important than the balances. The bankruptcy code sorts debts into three broad categories: secured debts, priority unsecured debts, and general unsecured debts.
Secured debts are those that have a piece of property attached to them as collateral. If you default on those debts, the creditor not only has the right to enforce the debt against you, personally, but may also have the right to enforce the debt against a piece of property, like a house or a car.
For your first meeting, know the balances of your secured debts, like mortgages or car loans. Know the monthly payment. Ideally you could bring in your most recent statement. If you are behind on the debt, try to figure out how far behind you are, dollar-wise. And if a secured creditor is trying to foreclose, bring any correspondence or notices you might have received from the creditor or from a law firm.
Priority Unsecured Debts
Priority unsecured debts are those that do not have a piece of property attached to them (like a secured debt), but which will not be discharged or eliminated in a bankruptcy. These include certain tax debts and child support arrears.
Because these debts must be paid in full in Chapter 13 bankruptcies, it would help your attorney to know the balances of any tax debts and/or child support arrears in case you must file a Chapter 13. And since some tax debts – particularly older ones – are not priority debts, know for which tax years you owe so your bankruptcy attorney can explain which tax debts are priority and which are general unsecured creditors.
General Unsecured Debts
Speaking of general unsecured creditors, the amounts generally do not matter because, with certain exceptions, they will all be eliminated under Chapter 7 bankruptcy. The amount you may be required to pay back in a Chapter 13 is more often determined by your income rather than the amount of debt you have.
Regardless, bring some idea of the types of general unsecured debt you have (credit cards, medical bills, deficiency balances, personal loans, etc.) and some idea of the amounts. Maybe pull your own credit report before your meeting.
Be Prepared to Talk About Your Income
Finally, be prepared to discuss your income with your attorney. The bankruptcy code says if you make too much money, you might have disposable income available at the end of each month to pay something to your general unsecured creditors. That is one reason you may be ineligible for relief under Chapter 7 and may only be able to seek relief under Chapter 13.
Think expansively about income. It could be wages, rental income, royalties, pension or retirement, roommate contributions – it’s all income. So, bring your paystubs (bring a spouse’s, too). Bring pension award letters, 1099s, etc. Past years’ tax returns are a great resource, especially if your income has stayed consistent.
You might guess that the bankruptcy code does not use the phrase “too much income.” And you would be right, it uses something a little more mechanical: the Means Test.
The Means Test
The Means Test certainly deserves its own discussion, but for our purposes, understand that the means test is in place to determine whether at the end of each month, after you’ve paid for living expenses, and taking into account taxes and car payments and health insurance premiums and lots of other expenses, you still have money to make a meaningful payment to your general unsecured creditors.
The means test is mechanical and even the most skilled, experienced bankruptcy attorney cannot say for certain what your disposable income is without actually running it.
However, this disposable income is simply the difference between your gross monthly income and the sum of “means test adjustments to current monthly income.” Think of those adjustments as deductions or expenses. And the disposable income is what is left over from your gross income after all of those deductions and expenses have been accounted for.
Even though your bankruptcy attorney will not be able to calculate the means test on the fly during that meeting, if you bring information about your income and information about certain of your expenses, your bankruptcy attorney will be able to take that information and calculate a projected disposable income after your meeting.
Accounting for Expenses
As for expenses, identify documentation for recent out-of-pocket/non-reimbursed medical and dental expenses, ongoing childcare expenses, and ongoing charitable contributions. These are just a few of the allowed means test deductions, but they are the most common. So if you bring information about them to your first meeting, your bankruptcy attorney will be able to produce a more accurate projected disposable income after the meeting.
Contact a Trustworthy Bankruptcy Attorney
Your bankruptcy attorney is going to do most of the work; that’s why you hire them. But by taking steps to prepare information about your assets, debts, and income before your first meeting, you’ll likely have a productive first meeting with your attorney and lay the foundation for excellent representation.
Questions regarding Bankruptcy? Contact The Wright Firm, LLP at (972) 353-4600.