Case of the Naked Client

The bankruptcy petition  came to my desk for review with no entry for “clothing and wearing apparel”.  Funny, I think I’d remember if I’d interviewed any naked people lately.

My new assistant has simply transcribed what the client reported on the questionnaire, and when questioned, the client shrugged that his clothing had no value, so he left it blank.

There are two overlapping issues here.  The simpler is the tendency of clients to disregard assets that they conclude have no value:  underwater stock options, overencumbered assets, and, yes,  used clothes. I try to make the point that I need to know two things:

  • Do you have any possessions that match this category of assets?
  • What is the value of those possessions?

If the answer to value is zero, the client is not excused from listing the asset.  So, some way, some how,  a bankruptcy lawyer has to convey to the client that there is no down side to over-inclusion.

The more difficult question is the extent to which you rely on the client to provide you with information.  A written questionnaire has a lot to say for it.  It requires the client to be engaged in the process and in theory to take responsibility for the end product.  When something or someone is later found to be omitted from the schedules, it reinforces the client’s signature on the schedules as being the client’s statement of completeness and accuracy.

I was once sued by a client for omitting an asset from the schedules.  Real early in the process, I produced the questionnaire, in the client’s handwriting, with a blank where the asset should have been reported.  Case closed.

When you get a questionnaire that reports no clothing, you have to ask yourself, what else did the client edit out of the list of assets and events asked about. Clothing is easy next to all the other kinds of assets and transactions that you want to include on the schedules.

A treasured friend who is a top notch bankruptcy lawyer sits down with the client and the two of them fill out the schedules face to face, so there is opportunity for digging, exploration and cross checking, live.  That takes time.  And it eliminates the written questionnaire that saved my bacon in the omitted asset case. But it assures that the attorney has followed up on responses that are too glib or inconsistent with the rest of the picture.

I don’t think there is an obvious right answer, but you must be aware of the issue and develop interview techniques and review routines that help you prevent filing cases for naked clients.


  1. Jan Pederson says

    I once had a client who wrote down he owned 1 book. Hope it was a bible.

    • I have clients who claim to have no books, records, or CD’s and I think to myself, what a bleak home.

  2. As a bankruptcy lawyer, I once defended another bankruptcy lawyer who got in trouble when his client failed to disclose his large horse and cattle herds to the bankruptcy trustee. This lawyer said to me – how was I supposed to know my client had livestock since he didn’t tell me? Well… I said, the fact that the client lives on a 160 acre farm in the country, the fact that most of the bills were “Smith Equine Veterinary Clinic,” “Jones Feed & Hay Supply,” etc., that the the budget listed 4-H expenses for the kids, and the fact that the debtor did disclose horse tack, horse trailers, and a hay bailer as part of his assets/tools of trade didn’t give you a clue??? Never mind the fact that the Schedule F on the tax returns showed farm income loss every year!

    Although I don’t personally don’t use client questionnaires, I think as long as you have a system for meeting with the client, verifying the information whether taken orally or through a questionnaire, asking for and actually reviewing the documentation upon which the answers are based, that Cathy is right — that is what you need to do to do your best for your client.

    Cynthia Grimes, Lenexa, Kansas

    • Howdy, Cynthia! When I represented Chapter 7 trustees, at the beginning of my career, I often found “interesting” things for which the debtor bought insurance coverage, but never scheduled. It’s like a mystery novel, following the clues….