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TOO MUCH INFORMATION IN BANKRUPTCY SCHEDULES? Impossible! But Maybe Not!

By Joseph McDaniel, Esq.

My loyal bankruptcy readers know that a frequently asked question is: how much information do I need to put in my bankruptcy schedules?

The smarty-pants answer is that if you have to ask, it isn't enough. Disclose, disclose, disclose.

The three biggest areas where you must disclose are obvious and simple: there's real property, and there are cars, and there are transactions (because the bankruptcy trustee needs to know if you've transferred your car and your bare land to your sister the day before you filed).

But after you've gone that far, you still have far to go. I've written extensively about how to fill out the forms, and you know that if you've read the bankruptcy homework I ask people to do prior to visiting with me.

Now, different bankruptcy lawyers in Arizona have different opinions about how the schedules should be addressed, and so do different Arizona Bankruptcy Trustees.

You have seen the fabled Warfield Memorandum, soon to be a major motion picture, and you know that I agree with Mr. Warfield on one topic entirely, because he's entirely correct; you can't lump furniture on your schedules and expect the trustee in the case to be happy, nor should he be. A trustee has an obligation to work as a fiduciary for creditors in a bankruptcy case.  The trustee must have enough information on the schedules to tell the difference between what has been listed, and the list of exempt property in the State of Arizona (assuming that the Arizona Exemptions are the correct exemptions in the case; sometimes they aren't, particularly if the debtor has been in Arizona less than two years).

Time and U.S. Bankruptcy Judges for the District of Arizona will tell whether Mr. Warfield is correct that a computer cannot be exempted as a tool of the trade, or whether I am correct that the only item that cannot be exempted as a tool of the trade in an appropriate case is "a motor vehicle primarily used by a debtor for personal, family or household purposes such as transportation to and from the debtor's place of employment."

A different Arizona Bankruptcy Exemption applies to that motor vehicle, as frequent readers of my bankruptcy blog all know.

And to be fair, Mr. Warfield indicates that he will not object to a computer being listed as exempt if a series of requirements that are not a part of the exemption statute are followed. I believe that the exemption statutes in Arizona should be interpreted liberally in favor of the debtor, without the grafting on of requirements not in the statute. That's probably just me. 

But now I've heard it all. Seriously.

My brilliant young associate, Nina the Unpronounceable, of the Summa Cum Laude Clan, recently took a First Meeting of Creditors for the firm (a 341 Hearing), and the trustee told her that he wanted one portion of the schedules amended because there was too much detail!

I'm getting the transcript, so I can post it here for your edification, and for mine.

p.s. here's a riddle: what do you do when a trustee tells you he wants an amendment of some part of a bankruptcy schedule? You amend it, pursuant to his instructions!

Unless, of course, he wants you to omit an asset. Then you ask him to send you the request in writing.

Full post as published by Arizona Bankruptcy Attorney Blog on November 17, 2010 (boomark / email).