Documents at the Root of Bankruptcy Filing–In More Ways Than One

02 Aug Documents at the Root of Bankruptcy Filing–In More Ways Than One

Your bankruptcy lawyer will drive you crazy with document requests–even the simplest bankruptcy case is document intensive. Some documents are absolutely necessary, like tax returns and paycheck stubs. Others–like credit reports–may be optional. But there is no question that the more documentation you have of your financial life, the easier your bankruptcy case will be. And that may be true outside of bankruptcy as well.

One of the things I always ask my clients to provide are copies of the promissory notes for secured debts–home mortgage, vehicle loans, and finance company loans. Many, if not most, of my clients have retained copies of their deed and mortgage. Frankly, I am astonished when any client can’t lay hands on a deed–that’s really important. Yes, it should be recorded at the courthouse, but what if the courthouse burns down? (I know–in these days of electronic media, you would think there would be backup copies, but not every small rural county uses electronic media, or if they do, it may not go back all that many years. Keep your deeds, folks.) Some people–maybe a majority, maybe a little less, keep the paperwork relating to financing their vehicles. And almost no one can provide copies of everything–personal loans, credit card applications, store account applications and the like.

Sometimes it matters because you don’t know exactly who signed those credit card applications. Did your wife co-sign that application, or did you just make her a card user? Maybe you thought she was just a card user, but now that account is showing up on her credit report. What about that car loan for your kid–did you just co-sign, or are you the primary borrower? It would be helpful to be able to go back to the original documents to answer those questions (and maybe have the basis for disputing incorrect information on your wife’s credit report).

I ran into another variation of that problem recently. I filed a Chapter 13 for a client, who had a loan with a finance company. The loan was secured by a few household items, and that type of lien is fairly easy to deal with. But this loan was also secured by some jewelry, which our plan proposed to value. And that’s where the problem arose–the debtor’s memory of the items she pledged as collateral was different from the collateral claimed by the lender.

The debtor had a very clear recollection of taking out the loan. The finance agreement was on the front of the paper, and the list of collateral was on the back, but she didn’t even remember seeing the back. The list of collateral is not in her handwriting, and it lists duplicate items. It would be really helpful to have the copy that the client should have received at the time the loan was made, to see whether her copy had that second page, or whether it had been modified. So I asked the client what she did with her copy. Her reply: “I asked them to shred it.”

So, when she signed the loan papers, and they gave her a copy, and she gave it back and asked the loan officer to shred it for her. Her reasoning was that she didn’t like to have papers lying around that have personal information, so rather than retaining her copy, she had them shred it. She thought she was doing the right thing, protecting herself and her private information.

It is undoubtedly important to protect private information. Ask anyone from South Carolina, whose un-encrypted social security numbers, children’s social security numbers, and bank account numbers were compromised when the state tax agency was hacked (giving whole new meaning to the phrase “hacked off,” in my experience). But it is just as important to protect yourself by retaining enough information that you are in a position to prove what you own, what you borrowed, and what you pledged as collateral. Is it possible that my client just doesn’t remember the collateral list? Sure–if she had her copy of the note and security agreement, it might match the lender’s. But it is also possible that she left herself vulnerable to a careless or unscrupulous “fix” of the agreement after she signed it. We just don’t know.

So what should you do to protect your private information while retaining important documents? You could go the old-fashioned route and use a bank safe deposit box. A friend of mine recently told me that Bank of America offers a free safe deposit box with certain kinds of accounts. Maybe your bank does, too. Or you could invest in a lock box or safe for your home–just make sure it is fire resistant, or better yet, fire-proof. The other route you can go is electronic–scan your documents and store them in some form of electronic media. You can make multiple copies and store them in different places, or even store them in the “cloud.” If you use a .pdf format, you can redact sensitive information, like social security numbers or account numbers, to make those documents safer. Or you can just keep paper copies, and use a big black Sharpie to redact SSNs or account numbers. It’s not very elegant, but it may serve the purpose.

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