Starting the Bankruptcy Process
Now that we have discussed, in previous posts, how to stop a garnishment through filing bankruptcy, and what constitutes a normal economical bankruptcy, it is worth spending a short amount of time on what you as the client will need to get together in the way of documentation to get the bankruptcy process started. My normal practice is to gather most of the information I will need during a 1-hour phone call, which generally happens after a free 30-minute phone call to figure out whether bankruptcy is feasible. Several documents can then be emailed or faxed to me thereafter to complete the file. Additional hours of work take place soon after the call, so, as you can see, a lot of my time gets used up pretty early in the representation. For this reason, I generally request $500 to be paid up front before work begins in earnest, so I am not left “holding the bag” if the client goes another route (a lesson I learned the hard way, of course). Fees are usually paid by a debit card but can also be by check, money order, or cash. Just not by credit card, because credit cards are creditors subject to discharge.
The documents I generally request are in the following non-exhaustive (i.e., more information may be requested based on the individual client’s circumstances) list:
Bankruptcy Document Checklist
1. 2019 tax return (federal and state) for a Chapter 7 liquidation. 2018 tax return or W-2.
2. 2016, 2017, 2018, and 2019 tax returns (federal and state) for a Chapter 13 payment plan.
3. Most recent 6 months of pay stubs.
4. Most recent 3 months of bank account statements for all bank or credit union accounts (actual monthly statements if possible).
5. One account statement for each retirement account (IRA, 401(k), pension, etc.).
6. A concise list of all creditors, addresses, and amounts owed to each.
7. Credit counseling certificate (after you take the credit counseling course). To be clear, I will not need any numbers entered while taking the course, just the certificate of completion.
8. A list of all monthly income and expenses (we will discuss this during the initial consult).
9. Registration of title for all vehicles (the sheet the license sticker is mailed with, should be in the glove box). If you have it, please provide a copy of the actual title as well.
10. Copies of lease agreements and car loan documents.
11. You will need your driver’s license and social security card (actual documents, not copies) at the meeting of creditors, so now is a good time to think about where they are. During the pandemic, I need you to email or text pictures of the front and back of each.
12. The fee for a Chapter 7 bankruptcy is $1,500 paid before filing, or a signed assignment of $1,800 of the 2020 tax refund. In addition, costs of $335 must be paid to the court. At least $500 must generally be paid up front before work can begin.
13. The minimum fee for a Chapter 13 bankruptcy is $3,000, with a closing fee of $350 at the end of the plan. At least $500 must generally be paid up front before work can begin, and the remainder of the fees and costs can be paid through the plan. In a standard Chapter 13 bankruptcy, any additional work generally occurring after confirmation, apart from normal case closing, is billed at $200 per hour. Complicated cases requiring extraordinary work to obtain confirmation are billed hourly from the onset. However, again note that the fees are paid through the plan over a long period of time, and it is not all due up front.
14. Court documents addressing any garnishment or foreclosure, or at least the docket number and county.
Most of these items are information that I would not be able to efficiently obtain without the help of the client. Therefore, an efficient bankruptcy is a combination of work by the client and the attorney in getting all of the information. The client should understand that this is the requirement for representation, and client participation is necessary to make sure the client gets the most benefit from the discharge. At the same time, most of this information can be gathered without undue effort, especially since financial accounts can be accessed online, and HR departments can assist with providing a printout of all pay stubs. The other side of the coin is that, once the client has delivered everything I need to prepare the petition, you won’t be waiting very long on the attorney to do his job. I understand that bankruptcy is time sensitive, and I get my work done on the petition as quickly as possible so we can minimize disruption.
Filing bankruptcy is a good bit of work, both for the attorney and for the client, and that is good to understand early on. However, it is absolutely attainable, and like everything, getting started is that hardest part. In every case, I do my part to make the process as easy and friendly as possible for the client.