Tag Archives: chapter 7 and bankruptcy filing

Your Bankruptcy Consultation: The 3 Main Topics

Leave a reply

What happens at a bankruptcy consultation? The answer to this question is different depending on who the bankruptcy consultation is with, whether the consultation is in person or by phone, and what systems the bankruptcy attorney has set up for the consultation. I can give you some general insight as well as information about how I conduct my own bankruptcy consultations.

Consultation Fees

Many, but not all, bankruptcy attorneys do some sort of free consultation. The attorneys who don’t do free consultations aren’t necessarily more expensive; often, those attorneys feel that they are giving more value during the consultation phase, so they should charge a fee. Or they feel that they shouldn’t give away their time. There may be an incentive built into the consultation fee in the sense that the attorney may credit such a fee against the entire bankruptcy attorney fee if you hire them.

As of yet, I don’t charge bankruptcy consultation fees for the most part for a couple of reasons: First, I do all my bankruptcy consultations over a relatively short phone call and not in person. In-person consultations take up far more of my time and I always charge for those. This doesn’t mean that I do all my phone consultations for free. I may charge a small fee for other types of consultations, such as student-loan consultations, since I’m providing a lot of value during those sessions.

Second, I see the primary purpose of the bankruptcy phone consultation as determining whether your case is one that I am able to take. I ask enough questions to enable me to determine whether the case is one that I have the time for and whether it is of the type that I want to take. For example, if your primary reason for calling is to get help with keeping your home through a mortgage foreclosure, I’m probably not the lawyer for you, since I generally don’t like to take those cases. But I may have a good lawyer referral or two for you!

Discussing Your Situation

The facts of your particular financial situation will come up during the bankruptcy consultation. A variety of issues are relevant to your financial situation and to a potential bankruptcy case, the most basic of which are how much money you make and what kind of debts you would like to have discharged in bankruptcy.

Not by any stretch of the imagination are these the only two issues that will come into play in your bankruptcy case, but they are a good place to start. You should be psychologically prepared to answer all sorts of questions about your financial affairs that would be inappropriate in a social setting. Think about what you own that might have any resale value, how you incurred your debts, whether you are or have been involved in a business of any kind and with whom, whether your spouse has anything to say about you filing for bankruptcy, etc.

All the different factors that could possibly come into play regarding your financial situation are too numerous and varied to list here. Just remember that anything and everything impacting your overall financial situation is potentially relevant and don’t forget to bring it up with the bankruptcy attorney at some point.

Eligibility For Bankruptcy

One topic that’s relevant to every bankruptcy consultation is your eligibility for bankruptcy, which also ties into the question of which chapter you might file.

Sometimes, your financial goals might dictate which chapter you should file, such as saving a home from foreclosure, for example. But there’s also the question of which chapter you are eligible to file, if any.

During the bankruptcy consultation, the attorney might unearth information showing that you aren’t eligible for the chapter you had hoped to file, or that a different chapter of bankruptcy would be better for your situation. Or they might find that bankruptcy is a bad idea for you altogether.

If your gross (before tax) income is close to the line of eligibility, the attorney may want to run the means test for you. Running the means test is not simple or quick and you should expect to pay a fee for this process. In my practice, I roll this fee into the bankruptcy, if the client hires me to file their case.

Call to schedule a free telephone bankruptcy consultation with attorney Jennifer Weil at (201) 676-0722.

Must I report illegal or previously unreported income in my bankruptcy?

Leave a reply

It sometimes comes up that a person who wants to file for bankruptcy has income that is either derived from an illegal source (such as drug dealing) or that has not been reported to the IRS (when it should have been). Also, many people get confused between the reporting requirements for the IRS and those for the bankruptcy court – understandably, they tend to think that these requirements are the same when they are not.

The fact is, you need to tell your attorney about all of your income, regardless of whether it is derived from an illegal source or whether you think it is not taxable or should not count. Not all income is necessarily countable as such for certain purposes in bankruptcy – such as Social Security on the means test portion of the bankruptcy papers – but it all needs to be disclosed to your attorney so that their analysis can be completed accurately.

Illegal sources

A recent case from Pennsylvania highlights a problem with illegal income and failing to report it in bankruptcy. The debtor filed a Chapter 7 and received a discharge of her debts. Later, she was convicted of heroin and cocaine trafficking. As a result, the trustee for her bankruptcy case asked the court to revoke her discharge based on fraud, claiming that the debtor failed to report her revenue from her drug trafficking activities.

The court decided that while the debtor had a duty to report all income, even if it was from illegal activity, the trustee did not meet her burden of proof to show that there was a knowing and fraudulent intent behind the failure to report the illegal income. The trustee lacked basic evidence as to the amount of income and when it was received.

While the debtor in the Pennsylvania case prevailed in the trustee’s action against her, the case serves as a reminder of the pitfalls that await the debtor with illegal income. The debtor who has current income derived from illegal activity may wish to think twice about filing bankruptcy at all.

Unreported taxable income

And the potential debtor who has had income that was not reported to the IRS or to state taxing authorities when it should have been may wish to delay filing for bankruptcy until the tax issues have been defined more clearly. Specifically, any tax returns that should have been filed but were not need to be filed so that any tax debt or refund amounts can be set prior to filing. It is difficult to list a tax debt (or a refund owed to you) on your bankruptcy paperwork if you do not know exactly how much it is.

Additionally, you are required to provide your bankruptcy trustee with copies of your tax returns. Your case can be dismissed for failure to provide these copies.

Photo by Dave Dugdale.