My Friend Says…

by Rachel Lynn Foley,

Almost every bankruptcy attorney can testify that they have heard "my
friend says…" from a potential client or a current client. I
explained in my Pigs get Fat and Hogs are Slaughtered in Bankruptcy
article that bankruptcy cases are like snowflakes. No two cases are
ever alike. Therefore just because your friend was able to file a
Chapter 7 the facts specific to your individual case will vary and may
prevent you from filing the same type of case. For me if someone
starts a sentence with "my friend says", this is a warning sign.

If someone constantly compares their case to another it makes it
difficult to work the case because they are not trusting your advice.
That is not to say that you should not ask questions, do research or
ask how does your case differ from the friend's case. It just means
you need to obtain all the facts before you pass judgment. There are
many factors that come into play when a case is filed. Let's say your
friend files for bankruptcy and they were able to keep their boat and
fishing tackle but the trustee wants your 4-wheeler. You don't
understand and you think it is just not fair that you are losing stuff
and he gets to continue to go play every weekend at the lake.

Does this sound extreme? It is not. I hear accusations on a monthly
basis of "other" people being to able to get off scot free without
paying their creditors or giving up any assets. Does this happen?
Yes. How does this happen? Well the answer can be as varied as
snowflakes themselves but let's run through a couple of scenarios.

The first and foremost is a debtor who thinks they are smarter than
the system and does not list the boat and/or some of their creditors.
Is this penalty of perjury under bankruptcy law? Yes, and it is a
punishable offense. The trustee does their best to ferret out the
truth but if the debtor does not disclose their assets or if the asset
is not listed in a public database then the trustee may never know
that the asset exists. But before you even consider lying about your
creditors and/or assets ask yourself is it worth doing a nickel in
Leavenworth in order to keep that boat? For those who don't speak
prison slang a nickel equals five years. I do not know of any asset
that is worth doing five years in the federal penitentiary. Further
it strikes me as funny that I never hear that is not fair that my
friend is paying back all their debt but I do not have to.

The next scenario is a an attorney who does not list the asset and or
creditor for whatever reason. You know the fact that the documents
are not right but you figure oh well the attorney will be in trouble
and not you. This line of thinking is dangerous because not only will
the attorney be in trouble if they are caught but so will you because
you are signing the documents under penalty of perjury that everything
is truthful and accurate. The only time the debtor is not going to be
charged with a crime is when they have absolutely no clue what the
attorney filed nor did they give permission for the documents to be
filed.

You may be thinking that no attorney would ever do such a thing
because they can lose their license to practice law. Unfortunately,
it can and does happen as I represented a debtor where the attorney
filed the case that was fraudulent without her knowledge. She was
able to get her Chapter 7 discharge but she had to prove she had no
knowledge of the false documents that were filed on her behalf with
the court.

Another scenario where you case may differ from your friend's is where
your friend has a boat and let's say that the boat is worth $5,000.
You have a 4-wheeler worth $4,000. Both of you attempt to file a
Chapter 7 bankruptcy. Additional facts show that your friend has five
kids and is married. You are single and have no children. Both the
boat and the 4-wheeler are owned outright so the assets have equity
and can be sold to pay your respective creditors. The trustee is
going to let the boat go but he wants to take your 4-wheeler and sell
it for your debt. No fair, how can this happen? This can happen
under the law because your friend may be able to protect his boat
through exemptions.

I describe an exemption as a magic blanket that makes the asset
invisible to the creditor. Another way to explain this is an
exemption will match dollar to dollar to the value of the asset and
may prevent this asset from being sold.

In Missouri the main two exemptions I would use to exempt this boat is
the wild card and head of household. The wild card is $600 per
person. So if your friend files with his wife he now has a $1,200
exemption he can use to reduce the amount of funds the trustee is
entitled to take from the sale of the boat. This means that if the
boat sold for $5,000 the trustee can only keep $3,800 of those funds.
In addition to the wild card your friend will receive $1,250 credit
for being the head of the household and $350 a piece for each of his
children if they are under the age of eighteen. So he now will have
an additional $1,250 + ($350*5 children) = $3,000 to use to protect
that boat. So we take the $1,200 for the wild card exemption plus the
$3,000 for the head of household and he has a total of $4,200 to
protect the boat. The trustee will generally abandon their interest
at this point because it is not worth their time to sell the boat and
only receive $800.

So in our scenario we made you a single person filing with a $4,000
4-wheeler. The only exemption that you are entitled to is the wild
card because you do not have kids and you are not married. So you can
only protect $600 of that $4,000 that is if and only if you do not
have $600 sitting in your bank account that needs protection as well
on the day of filing. So the bottom line is the trustee has a
potential asset worth $3,200 to $4,000 and that amount of money is
more appealing to them than the $800 in equity that your friend has.

Confused yet? It is not meant to be. But I do want to show you that
there are many different scenarios as to why your friend's bankruptcy
differs from yours. No matter what anyone says bankruptcy cases are
not cut and dry. Similarly I do not think that any case is easy
because each and every case has the potential to go belly up if the
facts are not disclosed and/or the right questions are not asked.

You should always ask questions in your case or when you are deciding
to hire an attorney. Try and obtain as many facts as you can before
you start comparing your case to someone else's so that you can make a
true comparison.

Remember that knowledge is power. The more knowledge you have about
why your case is filed in a particular way the more power you will
have to run your own race and have a successful bankruptcy.

For more information on these matters, please call our office at 305
548 5020, option 1.

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