To review:  a judgment lien perfected within 90 days of filing may be avoided, and rendered unsecured, if the requirements of § 547 are met.  Where I practice, judgment liens are perfected in real property by recording an abstract where the real estate is located, and in personal property, by filing a notice of judgment with the Secretary of State.

So, your intake procedure has to search out these transfers at the beginning, and if there’s a transfer within the period that you want to avoid,  you must calendar the last day to file the case and preserve the right to avoid.  Judgment liens are discoverable on the public record, and there’s little defense to not looking for them if the client has assets that may be diminished by the perfection of such a lien.

Given the distractible nature of our clients, it may be difficult to keep the client focused and on track to get you want you need to file timely.  I suggest that if you aren’t getting full cooperation, you paper your file with a warning letter to the client about the costs of delay.

Many clients are petrified of the filing of a suit, but others are indifferent as to what happens next.   They may have chosen to ignore suit, and sometimes even fail to tell you about it or supply the pleadings.

Like most things in this practice, the amount of energy and expense you devote to independent investigation of situation is guided by the situation of the client.

But having identified a meaningful preference, start the countdown to 90.

We’ll talk another day about preferential transfers the debtor might not want to avoid.  But counting is required there too.

Image courtesy of Tifotter

I didn’t and I’m sorry.  The client was full of guilt about the financial situation and kept insisting at our first meeting that “no one should be hurt but him” as a result of the financial predicament leading to bankruptcy.  That situation included back taxes on a joint return.

Now the non filing wife is spitting mad because she thinks that she was “promised” that the bankruptcy case would have “absolutely no impact” on her.  And she’s concocted some reason that she thinks has/will/might adversely affect her.  The client of  course claims it (whatever it is) is all my fault.

Somehow the wife has lost track of the fact that the family owes a fistful of money, including at least two years of back taxes.  But, in her mind, none of the perceived trouble is the result of the debts, but is traceable to the bankruptcy.

Maybe I should have seen the client’s initial desire to take all the responsibility for the situation on himself as not guilt, but fear of the irrational spouse.

It’s hard to figure out how to manage the situation when I believe much of the wife’s fears are irrational and unfounded.  Some of the consequences here may be unavoidable.  But it’s uncomfortable being caught between the two spouses.

Add “reasonable expectations of the non filing spouse” to your checklist of essential client characteristics.

Babel fish from Hitchhiker's Guide to the Galaxy

Bankruptcy debtors hear something different when their lawyer asks, “What do you owe on your mortgage”. It’s as though they speak a different language,  Client, while we speak Bankruptcy.  As  bankruptcy lawyers, we need to be bilingual.

It shouldn’t be a trick question, but all too often the answer a bankruptcy lawyer gets back is the principal balance.  Gone, somehow, are the arrears and corporate advances much less all the junk fees the homeowner knows nothing about.

It is the payoff balance that you want for the bankruptcy schedules:  principal, interest, and everything else owed to the lender to obtain release of the lien.  Knowing the arrears is important for the means test and for the plan, in Chapter 13.

But it’s also vital when you are considering a lien strip in Chapter 13.  You may need every dollar owed to the senior lender to push the junior lien over the edge of the equity.

So, once again, don’t take the client’s input at face value.  Probe to find out if the number you’re given for the mortgage debt includes any arrearages.  Develop your linguistic skills in Client-speak.

Image courtesy of Wikipedia and Stuart Halliday.

Waiting, in each case, allowed for a better bankruptcy outcome:  the client could put some time between the filing and an otherwise avoidable transfer to an insider ; get a final judgment in a divorce which would change the asset mix; or collect and consume a stream of income worth more than the available exemption.

Many consumers think that the sheriff will swoop down and pluck their paycheck from their hands within days of being late on a credit card.  They have trouble understanding that creditors invest a lot of time and energy trying to get customers to write them a check before they resort to the courts.

The other misconception that fuels the sense of urgency is a misunderstanding of how a lawsuit works.  They imagine that filing the suit results in coercive collection on the spot.  They are relieved to learn how long is really takes to get even a default judgment.

There are two points you need to make as a counselor at law:

1. Due process takes time: it requires service of a complaint & opportunity to defend.
2. Debts reduced to judgment are just as dischargeable as they were prior to suit.

Deliver a short review of constitutional principles, civil procedure, and bankruptcy law, and your client can file bankruptcy when the time is right.

I’ve been aghast at the willingness of lawyers brand new to bankruptcy practice to take on cases and issues far beyond their current competence.  I’ve tried to gently counsel that  both self preservation and the client’s best interest require the inexperienced to pass on cases beyond their present skill set.

I realized just how glib  and unrealistic that advice could be yesterday when a young lawyer asked about the impact on a Chapter 13 case should the debtor receive life insurance proceeds during the case.  Everything else about the case in question was vanilla simple;  the question of a windfall during a 13 is not, where I practice anyway, an obvious or settled question.  And the death of a loved one not necessarily predictable.

People are what makes this practice perpetually intriguing, and people’s lives take turns and twists.  We try to look as far down the road as possible, but issues lurk in the turn outs and the cross streets. We can’t foresee every complication that may arise in even simple cases.  We just have to be prepared to respond.

My thought on the possible life insurance payment was to consider whether the owner of the policy would consider changing the beneficiary designation to leave any proceeds to the debtor in a spend thrift trust.  Then we don’t need to speculate on what the answer to property of the estate and vesting questions is.

Photo courtesy of notelse.