Even with Bankruptcy, Put the Skunk on the Table
By Russell A. DeMott, Charleston Bankruptcy Lawyer on Oct 22, 2009 in Bankruptcy Myths, Benefits of Bankruptcy, Exemptions In Bankruptcy
Lawyers have a saying about trying a case: Put the skunk on the table. It means if you’ve got something really bad going on in your case, it’s best to just deal with it. Tell the judge or jury before the other side does so you can minimize the damage.
It’s really no different with a bankruptcy case. Don’t decide this “thing” you know about is just too bad to tell your lawyer. In the vast majority of cases, most of the problems clients tell me about can be solved by legal, ethical means.
Let me give you just one example. On occasion I’ll have a client who transferred property to his wife because he thought it would be protected from his creditors. If the wife didn’t pay the husband reasonably equivalent value for the property or he transferred the property to hinder, delay, or defraud creditors, that’s called a “fraudulent transfer.” The bankruptcy trustee—or any creditor if a bankruptcy is not filed—may set aside this transfer so the asset can be used to satisfy the debts.
Consequently, the asset is—as odd as it may seem—less protected from creditors than it was before the transfer. In addition, if the transfer was done within a year of bankruptcy, not only will the debtor lose the property, but the court can deny the debtor his discharge. (The discharge is the order of the court saying the debts are wiped out.) Fraudulent transfers cause big problems for debtors.
However, if I know about the fraudulent transfer of the client’s asset, I can “unwind it” and have the property transferred back to the client. I can then protect the asset by using the debtor’s exemptions. (Exemptions are property the debtor may protect from his creditors.)
So if the debtor puts the skunk on the table when I meet with him, I can (1) unwind the transfer, (2) claim any applicable exemptions in the property, and (3) wait to file the debtor’s bankruptcy if the transfer happened within the last year.
Tell your lawyer everything, even things that you think might hurt your case or things you find embarrassing. Your lawyer wants to help you, but he can’t if you don’t let him. So put that skunk on the table!
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