Real danger for client and lawyer lurks in the emergency bankruptcy petition: file without all the information about the client’s assets and recent transfers and you risk getting family members sued and the client losing assets.
Chapter 5 of the Bankruptcy Code deals with avoidable transfers, property of the estate, and exemptions. Those are potential potholes if you don’t see them coming. Let’s take avoidable transfers for example: repayment of debts to family members within 12 months of the filing are avoidable as preferences. File before you know who your client has repaid in the past year, and you may be setting Grannie up as defendant in a suit to recover the payment your client made to her.
Another gotcha is the income tax which becomes dischargeable after the passage of very specific time periods. File before the tax is sufficiently aged, and you risk having used up your client’s right to file bankruptcy without having gotten rid of taxes that might be dischargeable if you’d waited a bit longer.
In the current economic climate, we get folks seeking bankruptcy help at the last minute before garnishment or foreclosure. They come, with desperation and without a full set of information for you to advise them on the scope of the discharge in the case they want you to file NOW.
Understand the risk that you and the client encounter if you are stampeded into filing before you have the whole picture.
More on when to file bankrutpcy cases