Questions Your Bankruptcy Lawyer Should Ask

Whether you are hiring a bankruptcy attorney to help you with Chapter 7 or Chapter 13 bankruptcy, it’s critical that your lawyer know all the facts of your case. This will ensure a smooth process with the bankruptcy trustee and your first step toward your debt-free journey.

Updated on January 7, 2025.

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Key Points:

• A good bankruptcy lawyer will ask you about income changes and your current employment status.
• Your bankruptcy lawyer should ask detailed questions about any increases in credit card debt.
• If your bankruptcy lawyer doesn’t ask about your tax refunds, you should consider consulting with other attorneys.
• It’s critical that bankruptcy attorneys ask their clients if they are current on their car loans or mortgages.
• Household members such as friends and family could affect your bankruptcy case.
•  Any transfer of assets should be told to your bankruptcy attorney.

Questions a Bankruptcy Lawyer Should Ask

Filing for bankruptcy can be intimidating and is always the last resort for debtors. That’s why I’ve always been critical of the law change in 2005 when the Bankruptcy “Abuse” Prevention Consumer Protection Act (BAPCPA). As I’ve asked many times before, what abuse?

The overwhelming majority of bankruptcies are due to health-related issues, which may cause a loss of income or time away from work. Medical bills are the second reason, with divorce being the third.

When a client consults with me about filing for bankruptcy, I understand their concerns and worries. Because of that, clients may forget to discuss all the issues, so it falls upon the bankruptcy attorney to make the client feel comfortable and ask the right questions.

For this reason, I go into detailed questioning with clients to avoid surprises down the road. Unfortunately, not all bankruptcy lawyers discuss details with their clients; sometimes, the results are to the client’s detriment.

However, by reading this blog post, you should better understand why I ask specific questions and why your bankruptcy lawyer should ask them, too. If your bankruptcy lawyer seems rushed and is ready to move on to the next client or walk you out the door, you should consult with another bankruptcy attorney.

While over-generalizing, I have always guided myself by the belief that what starts bad ends bad. So, if you do not feel comfortable with your bankruptcy attorney, continue to shop around and meet with other bankruptcy lawyers until you feel comfortable and your questions are asked.

I can guarantee you that a lawyer who does not dedicate time to you during a consultation will not be returning your calls later on when you’ve hired them. With that, let’s get into the questions that I’d like to ask my clients.

Meeting with the Client- A Bankruptcy Lawyer’s Perspective

Besides introducing myself to clients, I prefer that my clients speak first. Clients do not need to feel that I have hijacked the consultation. It is a disservice to the client and disrespectful.

Clients have much to say and no one else they can turn to.  Granted, it does not have to be a fifteen-minute monologue, but their initial statements provide me with helpful insight.

Have You Filed for Bankruptcy Before?

The question is simple enough, yet it could lead a case down several paths.  When was the bankruptcy filed? Was the bankruptcy filing approved?  For example, if the client previously filed for Chapter 7 bankruptcy, another eight years must pass before another Chapter 7 can be filed. If Chapter 13 bankruptcy was filed previously, likewise, there should be confirmation on the end result of the case and when the petition was filed.

Further clarification is needed if the bankruptcy was filed recently and the case wasn’t discharged.

For example, if a client previously filed for bankruptcy to delay a foreclosure and is now in my office for the same reason, I will not take that case. As a bankruptcy lawyer, I have to file in good faith, and the last thing I want is to develop a negative reputation with the bankruptcy trustee or judge.

Many lawyers will file another bankruptcy for you, whether the second or third time, to delay a foreclosure. But I am not one of those attorneys, and I would be skeptical of those that are.

What Has Changed Financially That Filing for Bankruptcy Is Being Considered?

Why are you now ready to file for bankruptcy? Was there an increase in debt recently? If so, what caused the recent debt increase? If it is related to health-related issues, then that’s fine.

Why there has been a recent increase in debt is likely a question that the bankruptcy trustee will ask, especially since some trustees request credit reports.

Below is a blog post of common questions asked by bankruptcy trustees.

• The Chapter 7 Bankruptcy 341 Meeting of Creditors

Depending on the situation, a recent increase in debt could lead to further questions, such as what credit cards were used for. Often, the debt is valid, such as missing work; other times, a client, knowing they’re going to face bankruptcy, goes on a shopping spree.

While there is no magical number date, decisions are made case-by-case. For example, a client who recently purchased furniture or expensive electronics should wait to file for bankruptcy. At that point, the client should also make regular monthly payments on that debt to avoid future issues with the bankruptcy trustee.

Here’s Your Warning Sign About Your Bankruptcy Lawyer

The problem with that approach as a bankruptcy lawyer is that my honesty sometimes costs me money. Let me explain. If you recently got into questionable debt and your lawyer is not concerned, the lawyer is looking to cash in on their retainer. That’s probably a bankruptcy lawyer you shouldn’t hire because your lawyer will not have your back when things don’t go well at the 341 meeting of creditors.

The oath that lawyers take is no different than that of doctors. Lawyers must do what’s best for their clients rather than what’s best for them. So, while it is best for me to get hired by a new client, I should not do so if it is to my client’s detriment. So when I tell a client to come back and see me in six months, I lose money.

What is the Client’s Current Employment Status?

Knowing if the client’s income has increased or decreased recently is essential. If there has been a recent decrease, I must confirm that the client did not purposefully reduce their income to qualify for bankruptcy.

If there has been an increase or there will be an increase soon, I have to confirm that they will still pass the means test. A good example is clients I consulted with before the coronavirus pandemic.

Initially, they failed the means test and did not qualify for Chapter 7 bankruptcy. However, the COVID-19 shutdowns, one or two months with no income or reduced income, caused them to be eligible for Chapter 7 bankruptcy and avoid Chapter 13.

This is important because the financial change is often temporary, and bankruptcy could be avoided altogether (Chapter 13).

Sometimes, the client should contact the credit card companies and request a temporary pause on their monthly payments.

Does the Client Expect a Tax Refund?

Many lawyers ignore this subject even though it could cost a bankruptcy debtor thousands of dollars. I have written a separate blog post regarding taxes, which you can read below.

• It’s Tax Season and the Taxman and Trustee Want your Taxes

If your tax refund is not exempt or protected, the bankruptcy trustee will take your refund and distribute the funds to your creditors. This is obvious at certain times of the year, such as tax season. Regardless of when I consult with my potential bankruptcy clients, I always ask if they have received a tax refund in the past.

If the answer is yes and the tax refund is likely nonexempt, I tell the client of the issue so that the client knows when I would like to file for bankruptcy. For example, if we are in June, I would prefer the bankruptcy be filed by November.

Some bankruptcy trustees are claiming tax refunds on behalf of the bankruptcy estate by December.

If we are in the early months of the year, and the tax refund is coming soon, we must change our strategy, mainly delaying the bankruptcy.

Credit Card Usage Over the Last Few Months

One simple yet important question I ask to understand better the debtor’s case is the balance on credit cards in the last couple of months versus six months ago.

If the amount of debt has remained consistent, then there are no issues, as the client was trying to avoid bankruptcy and was making timely payments.

My concern is a substantial increase in credit card debt recently. Then, more detailed questions are required to confirm that there will be no issues with the bankruptcy trustee.

Are There Any Secured Creditors?

With secured debt such as car loans and mortgages, I need to ensure that my client is current on the payments because Chapter 7 bankruptcy will not protect those assets if they fall behind.

If the client needs to catch up on their payments, I focus on Chapter 13 bankruptcy if they are too far behind. If it is a month or two and the client believes they can catch up, then while I start the Chapter 7 bankruptcy, I can only file the bankruptcy petition once the client is up to date and has confirmed that with me.

Again, that honesty costs me a couple of thousands of dollars because the attorney’s fees for Chapter 13 bankruptcy are substantially more than for Chapter 7. However, many lawyers at this point will push their clients toward Chapter 13 when the client only needs some time to catch up on payments.

Who Lives in the Household?

Who lives in my client’s household is essential and is a question that bankruptcy attorneys usually overlook. Most people believe that if they file for bankruptcy, why are household members relevant, but there are two problems to consider.

Household expenses, such as utility bills, would increase if another family member lived in the home. Also, friends or family members residing in the house normally contribute to the expenses. That should be reflected in the bankruptcy petition and could affect the case.

This might result in disposable income, which pushes the client to Chapter 13 bankruptcy. Of course, many debtors wonder how they would determine if they’re being paid in cash. Very simply, we are living in the world of the Internet and the information age. Bankruptcy trustees can access databases showing who else has registered at that property.

I have seen this situation before with prior clients, and it could lead to unnecessary complications with the bankruptcy trustee.

So always be truthful with your bankruptcy lawyer about who resides with you and their financial contributions.

Has There Been Any Transfer of Assets?

Transferring assets could be an issue depending on the asset’s value. For example, if your son or daughter just got their driver’s license and you transferred a vehicle to them, the issue is the car’s value. If the car’s equity is exempt or protected, then it’s not an issue.

However, transfer a vehicle or any other asset to a friend or family member with nonexempt equity, and I promise there will be issues with the trustee who will accuse you of bankruptcy fraud.

If there was a transfer, be detailed by providing information to your bankruptcy attorney, such as your relationship to the person, what was transferred, why, the transfer date, and the asset’s approximate value.

Are You Currently Going Through a Divorce or Separation?

Unfortunately, divorce is one of the top three reasons debtors file for bankruptcy. However, the issue is that a person who has separated from their spouse only to reduce the household income and qualify for bankruptcy.

Many attorneys ask their clients to read between the lines when they say, “Unfortunately, you don’t qualify for bankruptcy today, but by the way, are you and your spouse separating? Because if you were separated, you would qualify for bankruptcy.” At this point, the lawyer winks.

• Why You Cannot Pay Your Bankruptcy Lawyer with Your Credit Cards

So, I will ask clients if they have met with other bankruptcy attorneys and if they have separated recently from their spouses or domestic partners. I will ask why a divorce has yet to be filed, which would seem more of a priority than bankruptcy.

There is usually a legitimate explanation, but again, I have to ask the question because I know the bankruptcy trustee will ask that question. This is how I avoid surprises.

I am proud that if a bankrupt client has gotten into trouble, it’s because they lied. It was not because of a lack of questioning on my part. My questions have often prevented my clients from digging themselves into the hole of bankruptcy fraud.

This blog post will give you a better idea of some basic questions your lawyer should ask. Again, if your lawyer is not asking questions and seems rushed, I suggest you look for another bankruptcy lawyer.

Of course, your privacy is important, and no identifying information will be referenced.

If you need to learn more about the bankruptcy process, including interviewing clients, then make sure to check out my bankruptcy law textbook published by Taylor and Francis Group, a division of Routledge Publishing, the world leader in academic publishing. Consumer Bankruptcy Law: A Practical Guide for Students and Professionals.

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Please note that the information available in Bankruptcy.Blog should not be interpreted as constituting legal advice and should only be used for informational and educational purposes. Always consult a local bankruptcy attorney for specific legal advice about your case.