Today’s blog is a paralegal lesson for the entry-level bankruptcy paralegal or person interested in learning more about bankruptcy pleadings.

Voluntary Bankruptcy Petition

In this intro blog we will begin discussing the schedules filed in a bankruptcy proceeding. Let me start by explaining that all of the pleadings that are typically filed at the onset of a bankruptcy case are often called the Voluntary Petition or the petition. However, the Voluntary Petition actually only consists of the very first seven pages. 

The average bankruptcy case has approximately 50 – 80 additional pages. The majority of these remaining pleadings are referred to as schedules. This Paralegal Power Lesson is titled ABC’s of Bankruptcy Pleadings because will focus on explaining the first three schedules – A, B & C – and what they entail.

Bankruptcy Pleading: Schedule A

This is where all real property is listed. If your client owns real property, a tract of land, a building, condominium or any real property at all, it must be listed on this schedule.

The most common asset listed here is going to be your client’s home. Any single-family, multi-family, condominium, land or investment property should be listed on Bankruptcy Pleading Schedule A.

Mobile Homes

It gets a little tricky when we discuss mobile homes. Should we list a mobile home on Schedule A, as real property, or should it be listed on Schedule B? That is the question that has plagued many a legal professional.

The easiest way to answer that is to ask, “How mobile is the home?” If that home is on wheels and can easily take you on a camping trip this summer, it may have to be listed on Bankruptcy Pleading Schedule B. 

However, if that mobile home is skirted and fixed firmly to the land it sits on, it will more than likely be recognized as real property. I always list the property this way and then make sure I bring it my attorney’s attention so the attorney knows it is not just a regular home and of course, your attorney will let you know if they feel it should be listed differently.

Timeshare

Another type of real property that can be confusing for paralegals learning how to draft bankruptcy pleadings is a timeshare. When I started drafting bankruptcy petitions 14 years ago it was common for timeshares to have an actual Warranty Deed.

The first client I had with a timeshare threw me for a loop. I have this Warranty Deed that lists an actual address that my clients have never even visited yet my clients have an absolute interest in this property – what do I do? Well, in that case I listed it as real property.

Now when I see timeshares, they rarely have the Warranty Deed attached and are designed with some sort of point system. In this case, I can list them on Schedule B.

Bankruptcy Pleading: Schedule B

Schedule B is now incorporated with Schedule A. It is listed in the same pleading but as a separate section. This is the schedule that basically anything and every other piece of property a client owns that wasn’t listed on Schedule A will be listed.

Regardless of value, items must be listed in this schedule. Bankruptcy paralegals often have to remind the clients of this during the drafting process. Paralegals and attorneys should have form language that reminds the client that honesty is always the best policy – or something to that effect.

Click here to subscribe to this blog and I will immediately send you a copy of the disclaimer I give my clients on the first meeting. 

Household Goods

Let’s start with household goods. So many attorneys put forth bankruptcy petitions that simply say “household goods” and not a single description. Then the attorneys think the trustee is a jerk because their client is questioned about the details of their personal property. That is preposterous to me. 

An important thing to learn in this Paralegal Power lesson regarding bankruptcy pleadings is to consider the trustee’s job when you are drafting your petitions. The trustee is charged with the responsibility of thoroughly reviewing every case assigned to that trustee. If I am the trustee and I am reviewing a petition that has not a single description of household goods and only a value assigned to them, I will be forced to question that client at the hearing because I don’t know if the household goods the person has are just regular household goods or if they include anything of significant value. Sure maybe your client just has a sofa, dining room table and bed. So detail that. 

The trustee doesn’t know if that sofa is a Ron Arad stainless steel sofa, which will run you approximately $300,000, or your client’s grandmother’s old sofa from the 90’s. Make sure to detail your household goods, after all these are legal pleadings – they ought to be thorough and precise.

I rarely use questionnaires with my clients and rather interview them to learn about their property. Most people have the same typical pieces of household goods so I use TextExpander to just plug in the usual household goods and then make changes for each individual client. It helps me make sure we don’t forget something obvious like a bed or dining room table. I just type .hhg and all of the following text pops up:

Refrigerator; stove; misc. small kitchen appliances; dining room table w/ four chairs; sofa; misc. wall hangings; lawnmower; misc. household tools; three beds (mattress, box spring & frame only); two dressers and washer and dryer set.

Here are lists of other items that should be listed on Schedule B, regardless of value. I have had many clients argue with me that their personal property has no value. That does not fly with the trustee. If your refrigerator is working, regardless of its antiquated avocado green color and age, it is still of value to you as a working fridge and you could likely garner at least $25 at a garage sale for it – therefore, obviously it must be listed and valued appropriately.

• Electronics
• Animals (Pets & Livestock)
• Clothing
• Jewelry
• Firearms
• Sports Equipment
• Hobby
• Life Insurance Policies
• Money Owed to Debtor
• All Financial Accounts
• Business Property
• Tools
• Collectibles

Bankruptcy Pleading: Schedule C

In the words of Bankruptcy Trustee Deborah Peterson, “If it’s on A and B, I better see it on C or I am taking it.” It’s that easy. If you listed property on schedules A and B, it should also be listed on Schedule C, otherwise the trustee will be able to request the property be turned over to the bankruptcy estate. Schedule C is where all exempted property is listed. 

Another noteworthy Paralegal Power lesson on the ABC’s of Bankruptcy Pleadings is to know as a paralegal you are not ultimately responsible for applying the correct exemption to each item; however, as the person who drafts the pleading you need to familiarize yourself with them and make sure you and your attorney are on the same page with these. Check out our two-part series “Bankruptcy Paralegals & Exemptions” for more on exemptions.