What could possibly go wrong?

ARE YOU SERIOUS? Do you really think that a whole speciality of law, in which thousands of lawyers practice, is not necessary because nothing goes wrong? Gotta love your optimism.
Lookit. In the words of the Bard, “let me count the ways.”


Bankruptcy documents are filed under penalties of perjury and require that you list every little darn thing, even things that you don’t think you own yet.
Car accident? Pending inheritance? In the bankruptcy world, you own the asset when the event occurs and not when the cash finally reaches you. Do I have your attention yet? $500,000.00 fine and/or five years in jail.
It’s worse with inheritances, life insurance, and divorce property divisions: If the death or divorce occurs within 180 days after the bankruptcy is filed, the asset is considered owned as of the filing date.
Your parents put you on their deed. Everyone thinks that it’s yours only after they die. Wrongo-Bongo! Your “remainder interest”, your opportunity to have possession after they die, is yours to sell as soon as the ink is dry on the deed and not after the deaths of your parents. If it’s yours to sell, then a bankruptcy trustee can and will sell it. The value is reduced because your parents are still alive and rights to possession are delayed. A trustee can even delay the sale until your parents die just to increase the value of your remainder interest. Ouch!
Tax returns are pro-rated as of the bankruptcy filing date, with the pre-filing proportion being your asset and within the trustee’s reach.
Your teenage child’s car is in your name for insurance reasons. This might be a resulting trust, preventing the trustee from selling it.

Exemptions (Asset Protections)

There is a list of federal protections, and each state has its own list. Some states allow you to chose the federal list if you want and some don’t.
The state law to apply may not be the state in which you live. You apply the law of the state in which you live if you’ve lived there for the two full years immediately before the filing; otherwise you apply the law of the state in which you lived the most days of the 180 days before the two years before the bankruptcy case is filed.
Bodily injury from car accidents has its own special federal protection; pain and suffering does not and has to fit within the federal “wild card” if you’re using the federal exemptions. Some courts allow emotional distress to be protected as a bodily injury.
Protecting cash value life insurance at the state level might just be weird. Those laws could have been written over 100 years ago and be impossible to understand.
Retirement funds are “mostly” protected. College funds are “usually” protected. The rules are complicated.


Giving away stuff before filing a bankruptcy case has a bad smell to it, yes? So there are rules. If you didn’t get fair consideration for the exchange, then it’s considered fraudulent to your creditors. You don’t get bankruptcy protections if within one year before your case is filed. The transferee can be sued for as long as your state’s law allows, with the recovery redistributed to all creditors proportionally.
Transferring stuff to pay toward a debt is only free from attack if the bankruptcy case is filed more than 90 days after an arms-length transfer and more than one year after a transfer to an insider (family or close friend), unless the transfer is within your ordinary course of business. (Courts split on whether a consumer can have an ordinary course of business.) This is to prevent you favoring one creditors over others. Those poor innocent credit card issuers need protection, too!
Let’s not forget the “continuing concealment doctrine”, where a transfer is ignored if you retained effective control of the transferred asset.

Means Test

OMG, so much can be written about this complicated and obtuse requirement. The means test is how Congress has you figure out whether you have the means to pay a meaningful amount of your debt. The form is like the worst eight page tax return imaginable. There are legal tricks that aren’t obvious, and a mistake in the income or expense figures you use can put you in an unnecessary five-very-long-year chapter 13 case. What do to with the income of a non-filing spouse is, all by itself, at the cutting edge of uncertainty.


Not every debt goes away in bankruptcy. Recent taxes, fraud, and most student loans at the top of the list of being troublesome.

Singleton Issues

You must comply with the counseling requirements, one before the filing (the day before, not earlier in the same day) and one after.
Unlisted debts often are not discharged, depending on your jurisdiction.
Unlisted family debts prevent family members from sharing in any trustee recovery.
Multiple filings within one year require special attention to achieve the protection of the automatic stay, an injunction stopping your creditors from acting against you on their debts.
Resist the pressure of requests to reaffirm your mortgage and, depending on your jurisdiction, your car loan as well.
Don’t destroy business records. You might be denied your bankruptcy discharge.