June 24, 2019

Bankruptcy Specialist: Do I need one?

North Carolina Board of Legal Specialization, Consumer Bankruptcy Law and Business Bankruptcy Law – 1987-presentPeople choose bankruptcy lawyers based on many things, including their experience.  How do you choose the right one?

While there are a number of Charlotte attorneys who practice bankruptcy law that are competent, if not at the highest level, to handle most bankruptcy matters, there are a few extremely capable bankruptcy attorneys in western North Carolina.

Unfortunately, there are a number of attorneys who hold themselves out as bankruptcy practitioners but who have very little skill in bankruptcy law.

In this difficult economy, a glut of lawyers are looking for fees and their perception is that bankruptcy law is simple. These inexperienced folks can do real damage to their clients. I have seen this first hand in picking up the pieces of their botched cases and in representing bankruptcy trustees. How would you like to have a perfectly good case ruined by your attorney?

Common mistakes made by debtors’ lawyers

Debtors’ lawyers make many mistakes; the worst of these filing the case that should not be filed. This can happen when the lawyer simply does not know the law.

For example, let’s take a recent the case in which property was transferred to a spouse three years before the filing. The lawyer knew that this was beyond the two year statute of limitations for setting aside fraudulent transfers set out in the Bankruptcy Code. This was quite correct; however, the lawyer did not realize that the trustee could use the North Carolina fraudulent transfer statute to attack the transfer. That statute has a four year statute of limitations. In this case, the transfer was set aside, and the property was taken from the wife.

As a knowledgeable bankruptcy attorney certified by the North Carolina State Bar as a bankruptcy and insolvency specialist I would have advised the debtor to wait a year to file.

 Common mistakes made by creditors’ lawyers

It is not just debtors that can run into problems in a bankruptcy case because of a poor choice of a lawyer. I am involved in a case in which a creditor claims it was defrauded, which might mean the the debtor’s debt could be denied. The attorney representing the creditor filed a motion to extend the time to object to discharge. Apparently, the attorney did not know that discharge and dischargeability are two totally different things.

Denial of discharge is effective as to all creditors and is based on a wrong done by a debtor that effects all creditors, such as concealing assets.

Denial of dischargeability involves a wrong done to one specific creditor, such as incurring an obligation through fraud.

In the former case, none of the debts are discharged. In the latter case, only the fraudulently incurred debt is not discharged. As a result, the time limit for objecting to dishcargeability passed, and the creditor cannot now file a dischargeability adversary proceeding.

The long and short of choosing a bankruptcy lawyer is choosing someone who is competent to handle the particular debtor or creditor’s case. Not every case requires that the attorney be certified by the North Carolina State Bar Board of Legal Specialization as a bankruptcy and insolvency specialist, as I am. Nevertheless, picking an attorney simply because he or she has a snappy advertisement or because the fee is low can be a crap shoot.

The debtor or creditor should make careful inquiry before choosing an attorney. I welcome your call.