It’s All Contextual

When I was in Law School, my Civil Procedure professor (Joseph Kearney, Dean of the Marquette University Law School) loved to use the phrase “it’s all contextual”. And how right he was.
From time to time, I will get a client who becomes very upset because I just told him that he did not qualify for Chapter 7, and instead had to file for Chapter 13.  He’s upset because his co-worker, who makes more money than he does, recently filed a bankruptcy and was able to do so under Chapter 7. “How can I make too much money to qualify for Chapter 7,” he will ask me, “when my friend Bob makes more money than I do and he qualified for Chapter 7?”
What my client forgot is that Bob has a wife and four kids, whereas my client is a bachelor. The applicable median income levels are different for these two people.
It’s all contextual.
Another great example I get from time to time. “I don’t want to file for bankruptcy! My sister filed for bankruptcy and they took away her house!” What my client forgot is that perhaps her sister was four months behind on her house and decided not to file under Chapter 13 to stop the foreclosure. Or perhaps her sister had $200,000 in equity, whereas my client’s house is mortgaged to the hilt.
It’s all contextual.
The important lesson here is that bankruptcy is very complicated. Attorneys, such as myself, have the necessary training to parse through the details of your finances and to determine how a bankruptcy will affect you. Comparing your bankruptcy to your friend’s bankruptcy will drive you insane unless you know exactly what is different between the two of you, and how those differences will affect your case. No two people are alike, and no two bankruptcy cases are alike. A lot of wild rumors fly around about bankruptcy. Usually, someone who wasn’t particularly happy with the result of his bankruptcy will spread these myths about bankruptcy, which are not necessarily true, particularly since the bad results arose from that person’s particular (perhaps peculiar) financial situation.
Unless you want to go to law school and learn about bankruptcy on your own, you really ought to take the time to speak with a competent attorney to discuss your financial circumstances and explore your options. Try not to let ridiculous myths or half-truths frighten you from getting the financial help you need.

A word about tactics and loopholes…

One of the regrettable parts of being an attorney is being associated with the stereotypes that we lie and we exploit loopholes. Even more unfortunate is that the stereotypes are not unfounded. There are many out there who think nothing of a miscarriage of justice by merely omitting facts or by taking advantage of a technicality. There are some of us out there that have some integrity (and yes, I do like to think of myself as falling within that group). So I wanted to take a moment to discuss a few tactical and ethical issues as they pertain to bankruptcy.
Sometimes, I get the client who says “I talked to so-and-so and they said that I can do this-and-that. Why are you telling me something different?” Getting two different stories from two different people doesn’t necessarily mean that one is lying or even incompetent. First, you need to consider the source. If you are speaking to someone else who went through bankruptcy – a non-lawyer – they may misunderstand the legal mechanics that led to a particular result. I’ll give you an example. Client comes in to see me, and I tell her that she is going to lose her vehicle. Client complains that her friend said that when she filed for bankruptcy she didn’t lose anything. What my client doesn’t realize is that her friend didn’t lose her vehicle because the value was small enough to be fully exempt, and in my client’s case, she owns a collector car worth $80,000. Just because the vast majority of bankruptcy debtors don’t lose their personal property does not mean that being able to keep everything is an automatic privilege. Everything is in context. Another example – I once told a guy that he made too much money to qualify for Chapter 7. He got angry with me and said that his co-worker, who made more money than him, was able to qualify for Chapter 7. What he forgot to consider is that his co-worker is married and has 2 kids, whereas my client was a bachelor with no kids. The applicable median income level was different. Circumstances can change everything about a case.
Even if you get different stories from two attorneys, it’s not necessarily a sign of incompetence. Often, attorneys are not working with the same quantum of facts. Our advice is only as good as the information we can collect from the client. Often, I see clients get bad news from one attorney, then they seek a second opinion and they leave out a critical piece of information (intentionally or unintentionally). Then they ask why the first attorney said something different. When I’m the second opinion, I can often detect what the missing information is based on what the client tells me about the first attorney’s advice.
Then again, some attorneys have different levels of integrity. They are willing to bend rules, overlook facts, lie, remain intentionally ignorant of certain facts, or pretend to be ignorant of facts. If you choose an attorney who practices like this, you do so at your own risk.
I require my clients to tell me the entire truth and nothing but. I’m sure clients have lied to me and gotten away with it without me ever knowing. But I am clever enough to catch a good chunk of it, and once I discover a client has lied to me, it is immediate grounds for termination of our attorney-client relationship. I find that a lot of people think that they can protect themselves by omitting certain information that would be detrimental to their case. Works great if they get away with it. It sucks if they get caught because they can be denied discharge, even criminally prosecuted (yes, perjury is a bad thing). What makes lying absurd is that with bankruptcy, virtually every single problem can be mitigated or negotiated, particularly in Chapter 13. It might not be the result you had hoped for, but it certainly is a better result than getting caught defrauding the court. But your attorney (whether it’s me or someone else) can only help you and protect you if he has all of the facts. Once the case is filed, a lot of control and bargaining power is taken out of our hands and it becomes far more difficult to negotiate resolutions. In other words, if there is bad news that will impact your case, it is far better for your attorney to find out about it from you now, before your case is filed, as opposed to finding out because a creditor or trustee figured it out later.
Finally, I want to talk about loopholes. As bureaucratic as the bankruptcy process can be at times, we are not devoid of any sense of justice or subjective analysis. In theory, a debtor could be in technical compliance under all applicable statutes and rules, and still find himself on the defense of a § 707(b)(3) which allows for a case to be a dismissed when the “totality of circumstances” demonstrates abuse – or what many attorneys often refer to as the smell test. Therefore, I don’t encourage exploiting loopholes in the statutes as a way to cheat the system. The system will bite back – think of § 707(b)(3) as a universal patch for bankruptcy loopholes.