Why Courtroom Rules Work In Your Conference Room

“Objection: calls for a legal conclusion.”

That’s a perfectly good courtroom objection to a question asked of a witness at trial.  The rules of evidence make the court, not the witness, the sole arbiter of the law.

What does that have to do with filing bankruptcy schedules, you ask.

I suggest you import this courtroom maxim into your routine for exploring assets, debts and transaction history with bankruptcy clients.

Don’t ask a question that calls for a legal conclusion.

Broaden your questioning routine beyond questions that are based on conclusions of law and you are less likely to be surprised by your client’s testimony at the 341 meeting.

They are laymen for a reason

Even in our present day of internet “research” and courtroom TV, laymen get the law wrong, time after time.  If you couch your question in terms of a legal result, your schedules will be no more accurate than your client’s understanding of the law.

Ever asked a client if they own a car and gotten back the answer,”no, the bank owns it“?

The answer reflects the layman’s understanding that the lender has an interest in the car by having lent money to acquire it.  But the legal conclusion that the interviewee drew is wrong.  As a matter of law,  the borrower owns the car, the lender has a security interest in it.

If you ask only, “have you transferred anything in the past year“, you may miss the consensual lien granted to a family member, because your client doesn’t grasp that the grant of a lien is a transfer.

(54) The term “transfer” means—

(A) the creation of a lien;

(B) the retention of title as a security interest;

(C) the foreclosure of a debtor’s equity of redemption; or

(D) each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with—

(i) property; or

(ii) an interest in property.  11 USC 101(54)

Similarly, as a practitioner in a community property state, I see all the time the spouse who believes that the form of title defeats the presumption that assets acquired during marriage are community property.  The car may be titled to the spouse, but absent a pre nup or some very specific language in the title, the car is community property and is an asset of any bankruptcy estate, even if only one spouse files.

Conclusion-neutral questions

If you ask “who do you owe money to ?”, you risk getting only the creditors who send a monthly bill.  If you add, “anyone claim you owe them money?“, you may get the disputed claims and the unliquidated tort creditors.

Unlike your questioning of a witness in a courtroom, you don’t need to avoid absolutely the question that subsumes a legal conclusion.  You can ask, “do you own any real estate ?”.

But you must also ask, “is your name on title to any real estate?” and “have you taken your name off of any real estate?” and “is anyone holding title to an asset that is really yours?”

Including questions that focus on facts, and acts, may reveal other assets that we as lawyers would recognize as assets to be scheduled, or transfers to be disclosed.

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