Bankruptcy Consultant – Some Background

Apr 12th, 2014 | By | Category: Legal

Every once in a while I get a phone call from someone who has filed their own bankruptcy case. I hate to say it. However, inevitably they are calling because somewhere along the line they made a mistake. Now they are calling to get guidance on how they can untangle the problem. While my policy is generally not to participate in a case that has already been filed (who knows what other landmines are there), I’ll always take the time to listen and provide any insight I can.

I got a call like that yesterday and it had to have been among the most unfortunate cases I have heard. The caller was an older woman. She had filed a Chapter 7 bankruptcy petition on her own and had already go to the meeting of creditors. Apparently the trustee started asking questions about her retirement fund and wanted more information. The caller wanted to find out what she could do to get her bankruptcy dismissed.

First, it is very hard to get a Chapter 7 bankruptcy voluntarily dismissed. I told her she’d have to request the court to dismiss the case.

I just needed to talk about it

Then we moved onto the subject of her retirement fund. She was retired and had put her money (about $50, 000) into a ‘profit-sharing’ plan. I’ll be honest, I had no idea what that is. But I asked her more about it and she said to me that she was the trustee of this profit sharing plan. That sounded like a trust to me. In Colorado, trusts are generally non-exempt (unprotected) property when you file bankruptcy, unless there’s a ‘spendthrift’ clause in it. Which means that the trustee is going to do all she can to take the money in the profit sharing plan.

The problem is that you cannot just call something a retirement fund and expect it to be protected. While bankruptcy can protect your retirement fund, the retirement fund must fall within a given legal definition.

The bottom line is that the caller is probably going to lose her nest egg. If she had called me before she filed her petition that is said to have been avoided. There are all sorts of sources online encouraging people to produce their own bankruptcy. And people file bankruptcy on their own all the time without a problem. But if you are going to file on your own, do your homework. Make sure that your property is protected by the exemption rules. That can take a great deal of work. Or you can hire somebody who can tell you once you sit down for a consultation whether or not your property is protected.

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