Bankruptcy: Avoid the Fights!

11 Jun Bankruptcy: Avoid the Fights!

Bankruptcy is not an adversary process between the debtor and the trustee. It should be more of a cooperative arrangement. After all, the debtor needs the trustee to administer (or abandon) assets and to keep the creditors out of the way; and the trustee needs the debtors and their bankruptcies or they will be out of work.

All too often, the debtors and trustees lose sight of this. Debtors tend to fear the trustee because she can take their property away or force them to make a greater payment.

And many trustees just look at debtors as people trying to hide assets, understate income and find ways to thwart the system.

Recently, I attended a meeting of creditors in a Chapter 7 case. These normally go smoothly, with the trustee asking some straight-forward questions and the debtors answering honestly. In this particular case, however, the debtor’s counsel was pretty new to the process and this particular trustee thinks that all debtors (and their counsel) are hiding assets or lying about values.

So, the trustee, no doubt disappointed in a couple of mistakes on the paperwork, proceeded to grumble at the debtor. This resulted in the young attorney becoming defensive and belligerent, and ultimately, simply refusing to cooperate in the hearing.

What should have been a 5 minute matter took 20 minutes and was continued for a further hearing. And no one – not the debtor, the trustee, or the creditors – accomplished anything. I just couldn’t help thinking that if both sides had gone to the hearing with a little more respect for the other, this could all have been avoided.

For the bankruptcy system to work smoothly there should be some give and take between the debtors and the trustees. If the debtors are straight-forward and honest, the case will, almost always, proceed easily and quickly.

And the debtor will get his discharge.


image credit: djclear904

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Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.
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