In life, we often overlook the small things and the minor details. For the most part, this has no real significant consequence for us. Despite a few missed details, it our lives will still be “business as usual.” In bankruptcy, however, the “devil is in the details.” All the things that seem mundane or unimportant may have significant consequences, and it is important to provide your bankruptcy attorney with as many of those details as possible. We do not like surprises in bankruptcy court. That is why we ask for documents, and documents, and more documents.
If you are planning on filing bankruptcy, you will be required by the Court to complete various schedules and statements. Together, these are referred to as the bankruptcy petition. The petition can be reviewed by the bankruptcy trustee assigned to your case, your creditors, and any other interested parties. What will you need to complete this petition? The following are typical items requested by bankruptcy attorneys:
- Some kind of packet of information that requires you to list all of your assets (any property of any kind that you own), your debts, and any transfers of property you have made within the last two years. Most will also ask some additional financial related questions, such as who you have paid money to in the last 90 days, or what your income has been in the last three years;
- Two to three years of income tax returns, plus W2’s;
- Bank statements for all accounts maintained;
- Six months of pay stubs (or some other pay document that shows gross income and deductions for the last six months). If you are self-employed, six months of profit and loss statements;
- Copies of important documents, such as divorce decrees, wills, trusts, life insurance policies;
- Copies of any notices of foreclosure sales within the last year; and
- A List of all your creditors and/or copies of recent credit reports
Now, I know this is a lot to put together, but you must remember two things. Firstly, this should be the most difficult part of the bankruptcy process. Once you get over this hurdle, it is all downhill. I say this because bankruptcy is, in my opinion, mostly an administrative process. It is rare for a typical bankruptcy to become adversarial, in which two sides are arguing in court, or heavily litigating issues. Most bankruptcies involve submission of the petition and documents followed by one simple and straightforward hearing. Even if there are objections, these are done by motion and can, often, be settled easily between parties. Secondly, the devil is in the details, and all of the good document gathering you do for your attorney, will payoff for you in the end. It will provide the trustee complete and accurate information the first time around, so that there will be less questions and follow-up. It will also show the trustee that you provided thorough information and were not attempting to hide anything. A common statement from our Arizona trustees is that if a Debtor forgets to list clothing or household items, while these things seem minimal, it can really strike a wrong chord with the trustee. This becomes a red flag for the trustee to think what else not so minimal might be missing from the petition. Again, in a bankruptcy proceeding it’s all the details that become important.
So, even though you may think your bankruptcy attorney is trying to torture you by making you wade through all of your files, remember those documents are a necessity in having a successful bankruptcy.