Being a Virtual Bankruptcy Assistant is not only fun, at times, it’s also quite interesting, entertaining, and even shocking, because from one day to the next, you just don’t know what you’re going to find yourself in the middle of.
I wanted to relate a few fascinating anecdotes from our adventures in bankruptcy, while drafting bankruptcy petitions.
The “Hairy” Case
In the preparation of bankruptcy petitions, the complete income and expense picture of the debtor(s) are recorded and analyzed to assess whether the debtor(s) possess the financial ability to repay a portion of their debts, through a process called the “Means Test”.
Every legal provision relevant to the debtor(s)' circumstances is utilized to minimize or eliminate the obligation to repay certain debts, thereby providing them with the best opportunity for a fresh start.
This case featured a couple in which the husband experienced ‘male pattern baldness’ and wore a toupee, which required ongoing monthly maintenance.
When drafting the petition, the attorney instructed that I should include the ongoing monthly maintenance costs associated with the toupee on Schedule J (the debtors’ monthly expenses), which was roughly $150 at the time.
When the case went to court, the trustee over the case allowed the expense.
The Smoking Allowance
This bankruptcy case is in regards to a debtor’s recurring monthly expenses for cigarettes, which was included on the Schedule J list of monthly expenses.
When the case went to court, the trustee over the case allowed the expense.
A Single Mom’s Car Taken by the Repo Man…And Had to Be Returned!
The attorney handling this case had me file a skeletal petition (also called an emergency filing)…a petition with very little information—just enough to submit to the court and receive a case number. This was don’t because a it was the case of a single mother with two young girls who needed immediate help.
After a bankruptcy petition is filed, the bankruptcy court mails notices to all of creditors stating that they must immediately stop all collection attempts upon the issuance of a bankruptcy case number, pending the case's resolution.
Since USPS mail takes several days to arrive, attorneys also give their clients a copy of the certificate of filing, which includes the bankruptcy case number, to pass along to persistent creditors, who upon receipt of the case number are required by law to stop all collection efforts immediately.
In this instance however, the credit union had already dispatched towing company to repo the single mother’s car that had past-due payments.
When the repo man arrived, much to the surprise of the owner, he started hooking up the vehicle to haul it away. The single mother showed the repo man the bankruptcy certificate of filing and explained that he can’t take her car, and explained that she desperately needed it to get to work, but to no avail, and he drove off with the car in tow.
This single mother contacted her attorney, overwhelmed with emotion, detailing the events that had transpired, and he promptly set to work on resolving the issue.
The attorney picked up the phone and called the credit union that had provided the loan, and subsequently repossessed the vehicle. He got a vice-president on the phone, who was knowledgeable about the legal implications, as he acknowledged that the car could not be taken due to the ongoing bankruptcy case, so informed the attorney that the woman could retrieve her vehicle from the credit union at any time.
The attorney emphasized that the repo man had been presented with the certificate of filing and should not have removed the car at all, and insisted that the vehicle be promptly returned to the woman's driveway from where it had been taken.
The VP of the credit union complied with the request and promised that the car would be returned to the owner’s driveway before her departure for work the following morning, which it was.
$800 Per Month for Clothes
This is a case that I was not involved with, but witnessed first-hand.
I had drafted a bankruptcy petition for an attorney client, and he asked that I attend the 341 meeting with him, which I agreed to do.
As we sat there in the court waiting for the scheduled 341 meeting for the client of the attorney I had drafted the petition for, we listened to several 341 meetings of other cases filed by other attorneys.
During these 341 meetings the trustee would ask the debtor and their attorney any questions he had about the information represented in the bankruptcy petition. Any creditors listed in the petition that were present were also given the opportunity to ask questions.
Once case came through where the trustee asked “What can you tell about this $800 monthly expense for clothing?”. The debtor made several seemingly unsuccessful attempts to justify her need for the funds, to which the trustee responded, "I will not permit it."
While the above clothing expense example seems excessive, it should be noted here, that under different circumstances, the $800 per month expense on clothing may be reasonable, and even be allowed. If the debtor had an occupation that required a high monthly clothing expense, such as is the case with a professional model, dancer, actor, etc., the trustee might very well allow it.
The “Quick Loans” Dilemma
A woman, facing some financial difficulties, drove to 19 different "quick loan" companies, and secured a loan from each one. In doing so, she failed to disclose to any of them that she had already borrowed from the other 18 companies.
Although her actions stemmed from a place of desperation, they also constituted fraud.
Fortunately, she recognized the gravity of her situation and sought guidance from a bankruptcy attorney.
The attorney advised this woman the only means of avoid jail time was to file for bankruptcy, and to do so immediately.
The attorney had me draft and file an emergency (skeleton) petition, and he really helped her out of this dire situation.
The $60,000 Surprise Purchase
This particular case involved a married couple, although only the wife was filing bankruptcy.
Following the 341 Meeting before the trustee, the attorney contacted me stating that his client had revealed to the trustee during the meeting, that her husband had recently acquired a truck valued at nearly $60,000; something he was unaware of.
Because only the wife was filing bankruptcy, it was unnecessary to disclose this information and only served to raise the trustee's suspicions regarding the debtor's petition.
Fortunately, our bankruptcy petition was solid, so the attorney had no concerns; however, it would have been helpful for the attorney to know this information before it was disclosed publicly, and he could have given legal counsel to the client prior to going into the meeting.
It just goes to show that there are always surprises in every bankruptcy case, but some are bigger than others!
The Missing Yacht
This story may resemble a plot from a film or the title of a mystery novel; however, it pertains to the importance of conducting meticulous work and equipping the attorney with reliable information.
While preparing a bankruptcy petition for an attorney in New York City who was representing a married couple who owned a liquor store, I conducted an online search of the debtor's names as part of my due diligence research, to gather any available information about them that I could.
The majority of the findings were standard; however, I came across a yacht registered to the debtors that was listed at a marina, and had not been revealed to the attorney. The online information provided details such as the yacht's name and the specific slip where it was docked.
Upon submitting my draft petition to the attorney, I provided all of my notes regarding the case, which included the details about the yacht discovered. This was done to ensure that the attorney could adequately advise his clients on the matter.
I’m not an attorney, and I worked remotely on this case, so I don’t know all of the details about the case, however, what I do know is that the attorney mistakenly filed the petition with the court without before adding the yacht to the debtors assets on Schedule A/B.
Perhaps this was a simple oversight (which can be corrected with filing a simple amendment to the case), but what happened next is that at the 341 Meeting (their hearing before the Trustee assigned to the case), the attorney was thumbing through his client’s documents and a printout of the yacht, including a picture of it, fell out onto the table. The trustee saw this beautiful boat and asked “What’s that? Let me see it”, at which point the attorney handed it over and had some explaining to do.
It serves as a good reminder to thoroughly review every petition against the known facts, prior to filing it with the court.
A Free House for the Deployed Military Serviceman
Another case involved a member of the US military who was stationed in the Middle East during his bankruptcy proceedings.
During his deployment, the bank who held his mortgage initiated foreclosure proceedings on his house…something that is not allowed during an active bankruptcy case.
This enlisted member of the military was stationed halfway across the globe, fulfilling his duties to our nation and its allies, while his family continued to reside in the home. They were experiencing a difficult time of financial hardship, which left him unable to make the mortgage payments for a period of time, and was protected from foreclosure dure to the bankruptcy proceeding, yet the bank continued to pursue foreclosure.
The attorney on the case called the bank to clear up the matter, and suggested that due to the legal implications that the bank could face due to pursuing foreclosure during an active bankruptcy, that they might seriously consider releasing this US military serviceman of his obligation to re-pay the mortgage, and consider it paid in full, which is exactly what they did!
Summary
These short stories illustrate that bankruptcy work is far from boring. On the contrary, there is consistently something fascinating going on.
While there are even moments of genuine excitement, the most rewarding thing about working in bankruptcy, is the opportunity to be there to support in someone’s time of need.
Indeed; it is a privilege.
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