- Robert Weed
Planning: Why This Bankruptcy Lawyer Often Charges More
Tommy needs to file bankruptcy.
We’ve been holding off filing his papers for several months. Why? Before he talked to me as his lawyer, Tommy had pulled $40,000 out of his 401k. That was a problem–as long as it was in his 401k it was safe. But once it hit his bank account, the court, or his creditors, could grab it. (Virginia law allows Tommy, or most people, to protect $5000 in the bank.)
We spent almost three hours in two meetings planning for Tommy to use that money. Use it for things he needed, perfectly legal things that won’t be questioned. Things we can spell out on his court papers.
At the second meeting Tommy showed me an “asset notice” that had been sent to him by the bankruptcy trustee in his ex-wife’s Sue’s bankruptcy What’s this about? We looked it up in the court’s computer.
Sue will have to write a check to the trustee for $16,000.00. Sue and her bankruptcy lawyer didn’t take time to plan
Tommy’s ex-wife Sue filed bankruptcy while she had more than $19,000 in the bank. Since Virginia law allows her, like Tommy, to protect only $5000, her trustee will take the other $14,000! Ouch!
(Actually, it’s a little worse. Sue has used $2000 of her $5000 cash protection when she filed before back in 1999. So she only had $3000 left.)
This $16,000 loss would hurt anyone–but especially Sue, who’s been out of work for more than six months.
Sue saved $1600 by using the bankruptcy lawyer she picked–he charged her $800 and I charged Tommy three times that much. But she lost $16,000 because she and her bankruptcy lawyer didn’t take the time for planning.
(Maybe Sue didn’t tell the lawyer about all the money she had in the bank. The detail forms weren’t filed until 31 days after her short form was sent to the court. You need special permission to be that late.)
People see a bankruptcy lawyer because they need protection from their creditors. Careful bankruptcy planning aims for the maximum protection and the smallest loss.
Planning. That’s why I ask my clients to fill in my own 37 (!) page form before we meet. And why I often charge more than double what some lawyers do.
(Just so you know–of course I’ve changed the names and the details on this story. But the numbers–the numbers are real.)