Why is filing bankruptcy so much work?
Paper. Statements. Tax returns. Car contracts. Pay stubs. Appraisals. Title reports. Credit counseling.
It gets tedious fast.
So, why is bankruptcy so complicated?
Do you want the polite, professional answer, or the pointed, political answer?
Polite answer first: the bankruptcy bargain, your deal with the legal system & your creditors, is disclosure in exchange for the discharge.
Make full disclosure of what you have, who you owe, and what you’ve done with your money recently and you get a discharge.
You need to cooperate with the trustee and live with the legal consequences of the mix of assets, exemptions, and avoidance powers.
But tell the whole story honestly and you shed the dischargeable debts in your life.
The more opinionated answer is that filing bankruptcy is lots of work because Congress and the businesses who funded Congressmen a decade ago wanted to discourage bankruptcy.
After all, creditors don’t get everything they bargained for when a consumer discharges their debt. So big-money types didn’t want to let consumer off the hook through bankruptcy.
Some lawmakers believed that not paying your debts, regardless of the reason, was a moral failing. Don’t want to make it easy to be immoral.
Senator Grassley just plain hates lawyers, so if he could make it difficult for bankruptcy lawyers and keep good lawyers out of the field, bankruptcy “reform” was a great deal.
BAPCPA, the bankruptcy law passed in 2005, added lots of additional things to file, exercises to complete, reasons to get kicked out of bankruptcy to discourage people from filing.
There’s even a theory out there that a creditor goal in the new law was to extend the time necessary to prepare a bankruptcy case for a couple of months more, while folks kept making minimum payments. Minimum payments mean maximizing profits.
So bankruptcy is hard work because the 2005 Congress wants it to be hard, so maybe you won’t file. And their money backers will make a bit more money.
One of my clients just complained that to prepare his bankruptcy papers, my paralegal asked him for the same information I had asked him when we first met.
It may seem like duplication to the client, but not to the attorney.
As an attorney, I want to see the big picture for the client, the relationship between income, assets, and debts. I want to know what the client expects in his financial future.
And what it is that brings them to my office TODAY rather than last month or next year. What’s happening that you made an appointment to talk with a bankruptcy lawyer?
Having decided to file, the bankruptcy forms that my paralegal is drafting require the story in fine detail, not broad strokes.
How many payments left on your car loan? Is your retirement account ERISA qualified? Who else lives under your roof and do they pay for the privilege?
And on, and on. Because Congress wants to make this hard.
Bankruptcy not hard
But at the end of the day, and after BAPCPA, bankruptcy relief is still broadly available. It just takes a slog to get it done. The time you invest in filing yields huge returns.
On Labor Day, or any day, we honor hard work.
And in my office, we help with the work required to wipe out debts.