When Preparing Your Bankruptcy Schedules, How Much Detail Is Enough?

02 Feb When Preparing Your Bankruptcy Schedules, How Much Detail Is Enough?

Whether you are preparing to file a Chapter 7 bankruptcy, a Chapter 13 bankruptcy, or even a Chapter 11 bankruptcy, one of the first things you will have to do is provide a detailed listing of all your property. But how much detail is necessary, and when does it get to be too much? Practice may differ from court to court, and even from attorney to attorney, but it is safe to say that you need to provide enough detail to allow a trustee or the court to get an accurate overall picture of the kind of property you have.

I provide my clients with a series of forms to fill out, which ask a different series of questions related to the kind of property I’m asking about. For example, by questions about real estate cover an entire page. I want to know a lot about your real property, including when you got it, how much you paid for it, how much you think it’s worth now, and what the tax assessor thinks it’s worth. I have fewer questions about cars, boats, and recreational vehicles, but still a fair number of questions. When it comes to household goods, I basically want to know what you have, and what you think it’s worth, but I don’t need you to go counting teaspoons. Unless they are sterling teaspoons, but that doesn’t come up all that often. I hardly ask at all about clothing, knick-knacks, and consumables like food and cleaning supplies. I assume that all my clients have those things (I have yet to have a prospective client show up naked, after all these years) but I don’t need a lot of detail because those things don’t have much value to anyone else.

The information that I am trying to gather before I file a case for my client is exactly the information that a trustee is going to want to have. A Chapter 7 trustee wants to know whether there is anything that can be liquidated to pay creditors, and a Chapter 13 trustee wants to know the value of assets so that she can determine whether a payment plan is fair to creditors. So, for those assets that tend to have or accumulate value, I want a lot of information. For those types of assets that typically don’t have any value to anyone except their owner, I don’t need to know so much.

There are, however, exceptions to that rule, because there are certain items that can retain or accumulate a lot of value (say, for example, a hand-made European hunting rifle) while a similar item (like a hunting rifle purchased at Wal-Mart) won’t have much value at all. Some other examples: A Steinway grand piano, versus a a 40-year-old spinet; a Fender EVH Frankenstein replica guitar versus your basic Fender (even your basic Strat) that you bought for $500 at the local big box store. For some things the devil (and the value) is in the details, so don’t be surprised if your attorney asks a few questions about your “piano” or “guitar.”

Let’s say that you were one of the 300 people who plunked down $25,000 for the Frankenstein replica (and, by the way, EVH paid $50 for the body and $80 for the neck to make the original) or, even better, you have the world’s coolest grandma who bought it for you for your birthday. And let’s say things aren’t going so great for you and now you’re filing bankruptcy and you write down that you own a “guitar.” Well, don’t be surprised if your Chapter 7 trustee wants to know what kind of guitar, and where you got it, and how much it cost. He may even want to have a look at it. (And don’t count on the fact that it may not look like much; even if he’s more of a Jimmy Page man, he knows how to use Google just like the rest of us.) So, that being the case, wouldn’t you rather your attorney go through all that with you before your case is filed, so you will at least know what is likely to happen, and avoid any unwanted and unforeseen consequences?

I recently had a client hit the panic button when I asked him for details about some items, and wanted to know why anyone would need to know about his twenty-year-old mixed set of golf clubs. Well, until he told me they were twenty-year-old mismatched golf clubs, I didn’t know whether anyone would be interested. Obviously, those clubs have very little value except to the guy who has been using them for twenty years. But I need to know so that I can protect you, and your assets, by asking these questions before putting you in a bankruptcy. Don’t panic when your attorney asks nosey questions; she’s doing her job. Actually, if your attorney isn’t asking you nosey questions, it might be time to panic, or at least grow concerned.

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Däna (pronounced "Donna") Wilkinson, has been a bankruptcy lawyer in South Carolina for 20 years. She is certified as a bankruptcy specialist by the South Carolina Supreme Court.
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