Beware the Emergency Bankruptcy Filing

emergency bankruptcy

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.

Not to mention your loss of face or worse.

Avoidable transfers

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.

Discharging taxes

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.

Worry doesn’t equal need

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

When taxes become dischargeable


  1. Excellent Advice!

  2. Great advice even for the seasoned practitioner…. we all fall into this trap occasionally !

  3. Great advice!! I am starting to receive calls for emergency filings and I have already filed a few that have left me with large headaches once all of the debtors financial information has been disclosed.

  4. At least require that the intake sheet and checklist is complete before filing…but then that is just a few hours from a complete filing with all the schedules, right??? Not a true skeleton filing….

    We did one the other morning first couple of days of March, filed at 12:27pm for a foreclosure sale @ 12:30pm Trustee sale….I finished the rest at midnight last night….that was a loooooong day…but saved their home for a couple of months….

    • Cathy Moran, Esq. says

      You’ve got my point: make sure you have the whole picture before you file the petition. If the client has been forthcoming, and you’ve taken time to consider the client’s information, you should be good.

      My experience, however, is that clients never provide complete information on the first pass and there is a temptation when facing a deadline not to stop and analyze what you know, but rather to get carried along on the tide of the emergency.