Make Sure You Tell Your Bankruptcy Attorney These Things
Disclosing the full extent of your financial situation to your bankruptcy attorney is necessary for a successful outcome. Many people underestimate the importance of transparency in this delicate process, which can lead to complications down the line.
You need to share everything necessary for a successful bankruptcy filing, from listing your debts and assets to providing income details.
Things You Should Tell Your Bankruptcy Attorney
In 2024, bankruptcy filings reached 517,308, up from 452,990 in 2023, marking an increase of 14.2%. [1]
When preparing for a bankruptcy filing, you need to provide your attorney with a full picture of your financial situation. It involves disclosing details that might not seem important but are pivotal in the legal process. Omissions can result in legal penalties and complications.
Comprehensive disclosure supports your attorney in navigating bankruptcy laws effectively and aids in safeguarding your assets. Here’s a breakdown of what you should reveal:
Total Debts
Disclosing your total debts is a foundational step in the bankruptcy process. Gather and present a comprehensive list that includes mortgage balances, auto loans, personal loans, credit card debts, medical bills, and other obligations. This overview should reflect whether payments on these debts are current, delinquent, or in default.
While bankruptcy can often discharge many debts, obligations like student loans, taxes, and child support typically cannot be wiped out. Be careful of incurring significant new expenses immediately prior to filing, as these could cause disputes and complicate the process.
Nature and Amount of Each Obligation
Your bankruptcy attorney must be informed about the specifics of all financial obligations, both secured and unsecured. It includes living expenses, luxury costs like high car payments or indulgences such as private school tuition and gambling expenses.
Transparency about these can influence the approach taken in your bankruptcy case. The court scrutinizes financial transactions from the past two years, so ensure all disclosures are thorough to support effective debt resolution.
Income Details
Income details play a pivotal role. You must reveal all income sources such as household income, child support, social security benefits, and rental income. These details are necessary for determining your eligibility for Chapter 7 or Chapter 13 bankruptcy.
Even if your spouse isn’t filing, their income must be disclosed unless you live separately, as the court needs a total financial picture. Keep in mind that social security benefits, although disclosed, do not count as qualifying income but still impact bankruptcy planning.
Assets
Crafting a complete list of your assets is essential in the bankruptcy petition. It includes real estate, vehicles, major purchased items, collectibles, and any other significant personal property along with their values.
The transparency of this list helps avoid potential legal bankruptcy issues and ensures proper asset evaluation for the bankruptcy trustee. Disclosing all assets is necessary to prevent future complications and to ensure debts are addressed as per legal requirements.
Bank Accounts Information
Ensure you accurately list all bank accounts, including any balances, to your attorney. This includes standard accounts, online banking platforms, retirement accounts, and even apps like CashApp or PayPal.
Failing to report accounts, especially mixed-use personal and business accounts, can complicate bankruptcy proceedings. Accurate account reporting helps in applying the necessary protections during the process and avoids legal complications related to means testing or repayment plans.
Transferred Assets
Be upfront about any assets you’ve transferred, sold, or gifted before filing for bankruptcy. For legal purposes, any such transfers, regardless of when they occurred, need to be disclosed, along with who received the property and what consideration was given or received for it.
In addition, making significant payments to creditors before filing can complicate matters unless properly accounted for. Full disclosure of transferred assets ensures your bankruptcy lawyer can offer the correct guidance.
Inherited Assets
Inherited assets must be disclosed if you are set to inherit within six months of filing. Such an inheritance may be part of the bankruptcy estate, necessitating exemptions to shield it from creditors.
Previous Bankruptcies
When discussing your financial history with your bankruptcy attorney, disclose any previous bankruptcies you’ve filed. This information is vital as it influences the strategy and type of bankruptcy you may qualify for. Different forms of bankruptcy have specific eligibility requirements based on prior filings, such as Chapter 7 and Chapter 13.
Sharing details about past bankruptcy cases, including dates and the outcomes, aids your attorney in assessing any potential complications that may arise during the current filing. Full transparency about previous filings enhances your attorney’s ability to advocate effectively on your behalf.
Pending Lawsuits or Legal Actions
Inform your bankruptcy lawyer about any pending lawsuits or legal actions against you. These can significantly impact your filing for bankruptcy, as they may affect your financial situation, potential assets, and liabilities.
Disclosing this information allows your attorney to formulate an effective strategy to address these issues and possibly incorporate them into your bankruptcy proceedings. Understanding the nature of these legal actions helps your attorney assess any potential claims your creditors may have, ensuring that all aspects of your financial landscape are considered.
Recent Financial Transactions
Discuss any significant financial transactions or property transfers you’ve made in the last few years, particularly if they involve large sums of money, like major purchases, transfers of assets, or any payments made to creditors. It is necessary to prevent potential issues with fraudulent conveyance.
Such transactions can draw the attention of the bankruptcy court, particularly if they appear to favor certain creditors over others or if assets were sold for less than their fair market value. By disclosing this information, your attorney can protect your interests, and ensure compliance with bankruptcy laws.
Tax Returns and Obligations
Share your recent tax returns and any obligations owed to the IRS or state tax authorities. It helps your attorney to understand your tax liabilities and the implications of bankruptcy on these debts.
Contact Frego & Associates’ bankruptcy attorneys today to schedule a free consultation regarding your bankruptcy filing.
Source:
[1] Bankruptcy filings rise 14.2 percent. (2025, February 4). United States Courts. https://www.uscourts.gov/data-news/judiciary-news/2025/02/04/bankruptcy-filings-rise-14-2-percent
