Writer’s Block And The Bankruptcy Schedules

Comes the plaintive call on the phone:  how do I list this?

Faced with a blank schedule  and a house, located in another state,  titled to an estranged  non filing spouse, in which the debtor may have a claim under the marital property laws of California, the rookie bankruptcy lawyer froze.

I’m flattered to be asked, but the answer is, it hardly matters.  List it, and you’ve done the most important thing the Code requires:  disclose.

My approach is to give the trustee an honest head’s-up about the asset, so that if the trustee thinks there is something there, she has a fair chance to gather more information.

To make my client’s life, and therefore my life, easier, I want to put a thumbnail of the relevant information in the schedules.  In this case, the most important fact was that there was no equity in the property.  So whether there is a cognizable claim to an ownership interest under state law  or not, the bankruptcy trustee need go no further than finding that there is no value for the estate.

I suggested he add to the scheduled description a note that “interest of the debtor unliquidated”.   In that fashion, the filing spouse hadn’t taken a position on the character of the property that might come back and bite them in the divorce proceeding.

The unalterable rule here is if the debtor has title or possession of an asset, it needs to be scheduled somewhere.

It can be scheduled on B, with a note that the debtor holds only bare, legal title, with a zero in the value column.  Alternatively, it can be scheduled in the Statement of Financial Affairs as ” property held for another.”

If the client has neither possession or title, but thinks he’s entitled to either, then schedule the claim.

Just put a note on paper.  Let the trustee know.  Set your client up to actually get that discharge.

Image courtesy of Kristian D.