How to Read & Review Your Bankruptcy Petition: Part 1 of 6

One of the most important tasks you will undertake as a Metro Detroit bankruptcy filer is to read and review the bankruptcy petition and related documents that must be filed with the Federal Bankruptcy Court.

These documents will be prepared for you by your Michigan bankruptcy attorney. However, the information contained within your bankruptcy filing documents will have come from you.

That is, your bankruptcy lawyer will have drafted these legal pleadings from the answers to the questionnaires you complete for him or her and from the tax returns, income documentation, bank statements, real estate deeds, car titles, and other items that you gather for this purpose.

 

Isn’t That My Lawyer’s Job?

 

Your lawyer may draft your Chapter 7 and Chapter 13 bankruptcy petition and schedules. However, it will be your signature on the paperwork attesting to the completeness and accuracy of everything stated within.

When you appear for your 341 Meeting of Creditors hearing, you will be asked to verify that your petition and schedules and other documents are complete and accurate. You will be asked questions about what they say. You will be expected to know the answers to questions such as, “What do you think you could sell your Volvo for?”

In short, it’s your neck on the line. Under penalty of perjury.

Failing to disclose an asset that you own, for example, can result in Federal felony criminal charges for Bankruptcy Fraud. This charge carries a potential 5-year prison sentence.

Keep that in mind as you read on.

That all being the case, the purpose of this Article is to provide a roadmap for your review of your own bankruptcy documentation. This Article will describe the various forms you will need to review, the information contained in each, and the items you will need to carefully ensure are correct before you sign them and tell your lawyer that you approve them to be filed.

We’ll start with the first and primary document: the Voluntary Petition for Bankruptcy.

 

The Voluntary Petition for Bankruptcy & Bankruptcy Coversheet

 

The “Voluntary Petition for Bankruptcy,” or “petition” generally, is the short document that lays down the basic facts of your filing.

This form will lie atop of the pile of paperwork handed to you (or sent to you in PDF format, depending on your bankruptcy lawyer’s particular practice).

Here, it is vital that you read each entry to ensure that it describes you and the type of bankruptcy you are filing accurately.

The Voluntary Petition will require you to review the following:

 

• Your full name, as well as any martial names or other names used in the past;
• The last 4 digits of your Social Security Number;
• Your actual residential address;
• Your separate mailing address, if any;
• A statement that you are filing in your particular Federal judicial district (Eastern or Western District of Michigan) because you have lived in that district longer than any other over the prior 180 days—or if you are filing in that district for another reason, such as that is the location of your principal assets;
• The Chapter of bankruptcy you are filing (7 vs. 13, in most consumer cases);
• Whether you are paying the Bankruptcy Court’s filing fee in full with the petition’s filing or in installments—or whether you are requesting that the fee be waived;
• Whether you have filed for bankruptcy in the last 8 years, where, when, and with what Case Numbers;
• Whether any pending bankruptcy cases have been filed by your spouse or a business with which you are affiliated;
• Whether you rent your residence, and, if so, whether your landlord has obtained an eviction judgement against you;
• Whether you are a sole proprietor of any business, and, if so, the name and location and other information about that business;
• If you are filing Chapter 11, whether you qualify as a “small business debtor” under that Chapter (in most consumer cases, this box will be checked, “No. I am not filing under Chapter 11” by your attorney);
• Whether you own any property that poses an imminent hazardous threat to public health or safety, or property that needs immediate attention (such as animals that must be fed);
• Whether you have completed the required pre-filing credit counseling course;
• Whether your debts are primarily consumer debt or debt arising from business or investment;
• If filing Chapter 7, whether you have any property that is not exempted (you will know this after completed Schedule, see below);
• How many creditors you have within a range;
• How much your property or assets or worth, within a range;
• How much debt you owe, within a range.

 

Finally, you’ll need to double-check that you’ve actually signed your petition on the required signature-line, after all of this.

Your bankruptcy attorney—and the software used by your attorney to create your petition documentation—will handle most of the “legalese” portions of the voluntary petition.

The items you should review very carefully for accuracy are:

• That you have signed and dated the petition for your lawyer;
• Your Name;
• The last 4 digits of your Social Security Number;
• Your residential and mailing addresses;
• Whether or not your landlord has obtained a judgment of possession against you, along with related details;
• The Chapter 7 (7 or 13) of bankruptcy that you are filing;
• That any prior or pending bankruptcies filed in the last 8 years are properly disclosed.

 

As to this last item,  cases filed in the Eastern District of Michigan—including Detroit, Ann Arbor, Flint, Saginaw, and Bay City—will also include a Bankruptcy Petition Coversheet.

This Coversheet requires specific information about the date, location, case-number, and other information related to all prior bankruptcy cases.

And a signature.

All of the information on the voluntary petition is important and should be double-checked.  But these are the key items that have, largely, not been auto-populated by one of the  commonly used bankruptcy petition creation software programs, with information input into another form.

Somebody, somewhere, hand-typed your name and address into a field. It’s your job to make sure it’s correct.

 

Certificate of Credit Counseling

 

Did you complete the course? Is a copy of the Certificate of Completion attached to your petition? Does your Voluntary Petition have the correct box checked regarding the date of completion?

The Certificate will be inserted after the Voluntary Petition in most cases, but practice may vary in this regard from lawyer to lawyer.

 

Summary of Your Assets and Liabilities

 

The Summary of Your Assets and Liabilities and Certain Statistical Information is a two-page document that simply totals up the values of the assets, debts, income, and expenses itemized on the subsequent Petition Schedules.

These numbers are usually auto-calculated by your lawyer’s software program from the items on those following pages.

Thus, there is not much to review here. However, review it anyway. If any of the line-items totals appears crazily high or low, ask your attorney about it—and pay special attention to the Schedule from which that total is drawn.

You’ll be looking missing or duplicate assets, debts, or even income sources and expenses.

 

The Bankruptcy Petition Schedules

 

The bankruptcy petition “Schedules,” along with the Statement of Financial Affairs, is really the “meat” of the petition. That is, the most specific (and most personal) information about you will be found in the Schedules. These are also the sections that will make the most sense to you, as a lay-reader of bankruptcy documentation.

 

Schedule A/B: Property

 

The first of these is Schedule A/B, so titled because they used to be two separate Schedules, A and B. They are now combined into a single pleading that lists—and values—everything you own or of which you have a claim to or expectation of ownership.

For those of you filing for Chapter 7 bankruptcy in particular, it is crucial that you slow down and pick through everything listed very carefully. Remember: Chapter 7 is a liquidation bankruptcy. If property isn’t listed, it can’t be “exempted” and protected—and you can even be accused of willful Bankruptcy Fraud, a Federal felony crime carrying a 5-year potential prison sentence.

For those of you filing for Chapter 13, careful review is no less important.

What are you looking for here?

As stated, you are ensuring that everything you own or partially own or are owed but have not yet received or have a claim to own is listed—and assigned an accurate, justifiable, supportable dollar-amount value.

 

Real Estate

 

The first page (the “Schedule A” part) or two will list your real estate.

Yes, this includes the home that you reside in, if you are not a renter. It should also list timeshare interests, vacation properties, investment properties, rental properties, vacant land, and any other form of real estate—no matter where on the Planet Earth it is located.

The form contains a sort of mini-worksheet for each real property line-item which should feature the current value of the property (ideally supported by a recent appraisal), the value of the portion you yourself own if owned jointly with another, and the nature of your ownership (fee simple vs. tenancy by the entireties, etc.—your lawyer will have checked a box here already).

The value will be the whole value of the home. As the document states, do not mentally deduct for the value of mortgages or other encumbrances here. That’s what Schedule D is for.

Check the value. Check it again. And then check it again. Purposefully under-valuing property is another form of Bankruptcy Fraud. Don’t end up defending an allegation that you’ve done that.

Additionally, it will ask you to verify what type of real estate it is by way of a check-mark placed in the appropriate box. Single-family home? Condo? Make sure the right box is checked.

 

Personal Property

 

The balance of Schedule A/B is the “Schedule B” portion. This is for the listing of all other forms of property than are not real estate.

This will include automobiles, trucks, boats, household goods (furniture, clothing, dishware, etc.), retirement accounts, stocks and bonds, debts owed to you, potential lawsuit settlements or damages, checking account balances, hobby equipment—and more.

If you can own it—and do—it should be listed here. Again with an accurate value assigned.

That value, by the way, is what the property is worth the day that you file the bankruptcy petition. Thus, if you completed your bankruptcy lawyer’s intake questionnaire 3 months earlier, you may want to check the value of your stocks today, the day that you review (and file) your petition, against the potentially older information reflected in your review draft.

For furniture and other household goods, that value will be what used furniture is worth, in that age and condition that yours happens to be. Not what you paid for it when it was brand new.

Note that, depending upon your bankruptcy attorney’s preferences and practice, some line-items here may be grouped together or aggregated with a total value assigned. “Furniture,” for example, may be simply lumped together with a grand total value.

Make sure that value is accurate and fully accounts for all of your furniture if your attorney has done this.

If you know that one of your chairs lumped into a low-value household goods line-item is actually a valuable antique used by George Washington at Mt. Vernon, you’d better ensure that it is separately listed and valued accordingly (based on written appraisal by an antiques expert!).

 

Schedule C: Exemptions

 

Schedule C may not make a lot of sense to you at first glance.

Whereas Schedule A/B lists describes the assets contained in the “Bankruptcy Estate” created automatically when filing your case, Schedule C lists the property removed from that Bankruptcy Estate.

Property removed from the Bankruptcy Estate cannot be seized by a Chapter 7 Trustee. Likewise, exempt property does not inflate your Chapter 13 Plan payment amount in Chapter 13 bankruptcy.

That is, Schedule C lists the protections for each item of property that you own on an item-by-item basis.

Schedule C is formatted into 4 separate columns: (1) the description of the property (from Schedule A/B); (2) the value of the portion you own; (3) the amount of the exemption that will offset that value; and (4) the section of the US Bankruptcy Code (or Michigan statute) allowing you to exempt that property in that amount.

The important thing for you to review here is the value of the property vs. the value of the exemption. This information is found in the middle 2 columns on each page of Schedule C.

If an item of property is worth $100.00, but it has only a $20.00 exemption attached to it, $80.00 of that value is non-exempt. The property may be seized and sold by a Chapter 7 Trustee, or you may be required to pay your unsecured creditors that amount more in a Chapter 13.

Make sure that these values are correct. You won’t know one exemption from another. That’s your lawyer’s job, but if you see any non-exempt property or value, discuss this with your attorney before zipping past unknowingly.

If you know that you had an item of property listed with a certain value on Schedule A/B, and you don’t see it at all on Schedule C, this means that it is entirely non-exempt. It is fully exposed to liquidation in Chapter 7, and it will inflate your Plan payment amount in Chapter 13.

Discuss with your attorney. Flip back and forth between the Schedules as needed.

Take your time!

 

How to Read Your Bankruptcy Petition: The Bottom Line

 

We will continue with the balance of the Schedules, the Statement of Financial Affairs and other documents, the Means Test, and the Chapter 13 Plan in Part 2 of this series.

The bottom line throughout, however, is that, at the end of the day, it is your bankruptcy proceeding, not your lawyer’s. Your lawyers crafts the most accurate petition possible—but working with the information that you provide.

It behooves you to read your petition carefully and thoroughly. This is one of your most important jobs as a Michigan bankruptcy attorney’s client.

At your Chapter 7 or Chapter 13 341 Meeting of Creditors, after all, it will be you that is asked by your Trustee whether or not the petition and related documents are accurate. You must answer this question under penalty of perjury.

Attorney Walter Metzen is a Board Certified Bankruptcy Expert who has assisted thousands of Metro Detroit bankruptcy clients for over 30 years.

If you are considering filing for bankruptcy in Detroit and elsewhere in Michigan, contact us now to schedule your free initial consultation.