December 1, 2015 the bankruptcy playing field changed again. To some degree it will affect you as a client, but the impact on your bankruptcy attorney is extreme. In an effort to make the bankruptcy process simpler the courts have changed the bankruptcy petition, schedules and supporting documents. Remember when the IRS tried to make your tax filing simpler? This has gone about the same way.
New Consumer Bankruptcy Forms For Chapter 7, 13
At the end of November, 2015 the average bankruptcy petition was 44 pages long. Starting December, 2015 it is about 60 pages long. To me it is a bad omen for simplicity. In Cleveland we are lucky. One of our judges was on the forms committee. He was quite helpful explaining the rationale for things. At a seminar for Northern Ohio bankruptcy attorneys he had a presentation on the new forms. His advice? Read the official instructions on the changes. You can download this booklet. It’s 54 pages of more technical jargon regarding your bankruptcy petition than anyone needs to see. The only things that haven’t changed are the two forms they changed last year. It’s not that they simply changed things up, but the questions on the petition now ask for different information.
You’ve heard my woes, but how will this affect you as a bankruptcy client?
Will The Forms Increase Attorney Fees?
A number of bankruptcy attorneys on the NACBA listserve are increasing fees due to the additional information and preparation time that are now required. The newly appointed Chief Judge for the Northern District of Ohio issued an order for the Canton division increasing the allowable fee for a chapter 7 case to $1400.00 in view of the additional work created by the new forms. If a case requires the full means test analysis his presumptive permitted fee is $1600.00. You can expect the new forms to cause an increase in what it will cost you to file bankruptcy. At least one Cleveland Chapter 7 trustee has expanded his document request for the meeting of creditors in response.
One month into the new forms I see that they are causing much more work on my end for preparation. My attorney fee for chapter 7 in Cleveland will remain $1,200 for single filers and $1,400 for married joint filers in Cleveland. I do not add a surcharge for cases that require full means test analysis.
New Document Requirements
The most vocal complaint from clients is the never ending document demands. Exasperated clients often complain, “why do you need that?” The paper chase just got worse. My intake questionnaire was 19 pages long. To adjust for the new detail needed, the form has grown to 28 pages. On the positive side the intake form is now easier to understand and more pleasant to work with. I need more tax returns, more pay stubs, more bank statements, and vehicle titles are mandatory. You will need to keep the pay stubs, tax returns, and bank statements up to date until your case is filed.
Mind Your Business; Monthly Income And Expense Statements
If you are self employed or have no wage income the new forms have some Easter eggs for you too. Before the change you needed to list your business revenue in Schedule I and your business expenses on Schedule J. If a debtor or his attorney were sloppy they could simply schedule business income (revenue minus expenses) in Schedule I.
Now in addition to the totals are confined to Schedule I. You are now required to attach a statement for each business and property showing gross receipts, ordinary and necessary expenses, and monthly net income. The form does not reflect the time frame. Since we have 6 months of information already for your means test, Balena Law Firm, LLC will attach 6 months of info to Schedule I.
Tell Nothing But The Truth
The foundation of the bankruptcy process is always truth. Bankruptcy is designed to provide the honest debtor relief from his debts. Truth now has new meaning in bankruptcy. Previously when you signed your bankruptcy petition you were attesting that the petition was true and accurate to the best of your knowledge. With the form changes you are swearing or affirming to truth and accuracy. No wiggle room anymore for the “best of your knowledge.” The claimed reason for this change was to bring the bankruptcy forms closer to the federal perjury law. Will this mean more prosecutions for inaccurate or false bankruptcy filings? I don’t know. What I do know is that I want my clients to file petitions that are as truthful and accurate as we can possibly make them.
The reality is that except for minor changes the bankruptcy petition and schedules have been the same for over 20 years. December 1, 2015 brought substantial change. The notion was to simplify the filing process. Maybe it will live up to its billing. Now it’s more complicated and takes more time.