1. Credit Counseling. A debtor is required to take a credit counseling class prior to filing a Chapter 7. These classes normally take one to two hours, and can cost anywhere from $5.00 to $50.00. Importantly, the debtor who completes the class receives a certificate of completion which must be filed along with petition. A debtor can seek an exemption from this requirement by obtaining a court determination that taking such a class was not possible due to extenuating circumstances, or that it was unavailable within 5 days of debtor’s request for the service. As a practical matter, most debtors take the class on-line, so receiving the certificate prior to filing should not be an issue.
2. Bank Statements and Tax Returns. Debtors are required to provide the Chapter 7 Trustee with a copy of their most recently filed federal income tax return seven days prior to the creditor’s meeting. In practice, it is usually acceptable to bring this document to the meeting of creditors. In addition, the debtor must also provide the trustee with a copy of all bank statements for accounts that were open as of filing, so that the trustee can verify the accuracy of information on the petition.
3. Verify all information on the petition and related documents. Bankruptcy is a stressful time for debtors, which can cause some debtors to forget about assets or liabilities. It is always good practice to review the petition line by line with the debtor prior to filing. Amendments to the petition and related documents are liberally allowed, but it’s best to get all the information on the documents correctly prior to filing.
4. Fee waiver. If the debtor’s income is less that 150% percent of the general poverty guidelines based upon location and household size, the debtor may be able to obtain a waiver of the filing fee.
5. Cross-check for bank accounts. If the debtor owes an unsecured debt to the financial institution where he maintains his checking and savings account, that bank may freeze the account and apply to proceeds to the unsecured liabilities. Always double-check that the debtor is banking with an institution to which he owes no unsecured debt.
6. Disclosures. If a debtor has less than $175,000.00 in non-exempt assets (which covers most consumer bankruptcies), then the debtor becomes an assisted person and the attorney who represents him or her becomes a debt relief agency. As such, attorneys are subject to restrictions and disclosure requirements under § 526, 527 and 528. Failure to abide by these code sections opens the attorney up to sanctions, including disgorgement of fees.
7. Engagement letter. It’s always good practice to have a fully-executed engagement letter with the client prior to filing. This practice ensures that both the client and attorney are clear as to which services the attorney is providing, and how much the client is paying for these services.