Bankruptcy lawyers who mess up claims of exemptions were the other target of the trustee’s attorney I spoke with earlier this week. He rubbed his hands over attorneys who hadn’t collected enough information to understand the asset or who simply didn’t know that the homestead exemption didn’t apply to property other than the debtor’s residence.
It’s not surprising that exemptions are a fundamental source of error: think about the pro per filings that you’ve seen. While they might get most of the rest of the filing correct, the exemptions are most often either blank or riddled with mistakes.
Tying back to my last post on newbie bankruptcy attorneys failings, remember that the debtor cannot generally exempt property that was not disclosed or property that was voluntarily transferred by the debtor.
My questionnaire for clients is headed by an admonition to “list it or lose it”. Your interview with the client and your written materials should reinforce this idea. Clients are full of misinformation that “allows” them to exclude certain of their assets from the schedules.
The claims of exemption are freely amendable, over the course of the case, so, as long as the asset is disclosed, you can readjust exemptions if new information comes to light. You just can’t exempt new assets that were knowingly excluded from the schedules.
Again, “Let’s be careful out there“.
More on bankruptcy exemptions