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Bankruptcy Checklist

§ 6:6. Client conference—CHECKLIST: For client conference with creditor in Chapter 7 case

The client conference card enables the attorney to elicit the most essential information and instruct the paralegal on future actions. However, other information is necessary to determine the most appropriate method of enforcement of the creditor’s rights in the bankruptcy case. Presentation of all of this information in a preprinted format is frequently too bulky. The attorney should therefore supplement the information obtained through the client conference card by oral questioning. Below is a list of suggested questions which will elicit the information most frequently needed.

General Creditor Information

1. Has any sort of lawsuit been filed concerning the debt or the collateral? What sort of suit?Has the creditor garnished, sequestered, or otherwise obtained possession of any of the debtor’s property through the state court litigation?

2. Has any judgment been entered? (If so, ask the client for a copy, or obtain a copy from the court records.) Has any appeal been taken by either party from the judgment? If so, who is the appellant and what are the points of appeal? Has a bond been posted by either party to the appeal

3. If suit has been filed, who is the attorney or firm representing the creditor? Has the attorney handling the case been notified of the filing of the bankruptcy and resultant stay of proceedings?

4. Has the debtor asserted any counterclaims, defenses, or rights of setoff against this debt?5 Does the creditor’s debt arise out of the same transaction as any claim the debtor might have?

Ohio Criminal Defense Attorney Adam Hunt
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5. Has the debtor defaulted on payments before? How often? Is the debtor in default now? Has the debt been accelerated? How? Was the debtor given notice of the acceleration? When? How?[If property is leased personal or real property, ask about status of any action to recover possession.] (If written notice was given, ask the client for a copy

6. If the debt did not arise from a loan, how was the debt incurred?

7. Is there any cosigner or guarantor?

8. If a loan, were the proceeds used to purchase property?

9. Has any property or goods recently been delivered to the debtor? When? Has any sort of demand for reclamation been made? When? In what form?

10. Was the creditor doing any work for the debtor affecting the property of the debtor? Was a lien perfected? Was the process to perfect a lien commenced before the filing? [If the work done is the sort which would otherwise entitle the creditor to assert a lien, the creditor may be able to complete perfection of the lien even though the bankruptcy is filed. See 11 U.S.C.A. § 362(b)(3) and the statutes described in that section for a rather narrow possibility.]

10.5. Has the debtor filed bankruptcy before? When? In what court?

10.6. Has the creditor sent any type of writing to the debtor in the last 90 days which directed the debtor to send notices to a specific address, and which included an account number?

10.7. If there are any defects in documentation of an unsecured claim, the pre-conference review of the files should identify them for discussion with the client. If further documents are needed, or any other action taken to render the claim enforceable without a stay violation, the client should be advised and given a checklist for use in remedying any defects.

The Collateral

11. When was the lien/security interest perfected? (If not already obtained, ask the client for copies of all security documents.) [If there are any defections in documentation of a secured claim, the pre-conference review of the files should identify them for discussion with the client. If further documents are needed, or any other action taken to render the claim enforceable without a stay violation, the client should be advised and given a checklist for use in remedying any defects. Some security interests can be perfected after filing. See 11 U.S.C.A. § 362(b).]

12. What is the condition of the collateral?

13. Is the collateral subject to rapid depreciation or deterioration? Spoilage?

14. Does the creditor have a contractual right to inspect the collateral? If yes, when was the most recent inspection? Was the creditor satisfied with the condition of the collateral at that time? If not, what were the problems noted?

15. Under conditions of present use, what is the useful life expectancy of the collateral? Is the debtor actually using the collateral now? Have the conditions of use changed recently? If leased, was the property intended for use by the debtor in a business?

16. Had the creditor started foreclosure proceedings or attempted to repossess the collateral before the bankruptcy? What happened?

17. Is the collateral, or any part of it, presently in the creditor’s possession?

18. Does the creditor know for certain that the debtor still has possession of all of the collateral?

19. Does the creditor believe the collateral to be in jeopardy of loss or deterioration beyond what is normal for this type of property? If yes, explain.

20. Has the debtor made any payments since the filing of the bankruptcy? If so, when and how much?

21. If the debtor is required by contract to maintain insurance, does the creditor have written evidence that the insurance is current? When does the current policy expire? Is the creditor named as a coinsured? (Ask for a copy of the applicable insurance policy.)

22. Has the creditor received any money, property, payments, or additional security from the debtor in the three-month period before the petition was filed? Was any sort of lien created in that period by recording an abstract of judgment or other action? When was the last prepetition payment made by the debtor?

23. If the answer to question 22 is “yes,” did the creditor provide any new goods, services, loans, etc., at the time of the transfers from the debtor? What were they? Business or personal use by the debtor?

24. Does the creditor receive periodic payments from the debtor? How often? Were the payments received by the creditor regularly and in approximately the same amount or percentage of the charges each time?

25. If the debt was secured by a lien on the debtor’s inventory or accounts receivable, did the creditor monitor the value of the collateral? How? What was the value of the collateral 90 days before the petition was filed? On the date the petition was filed?

26. Has the creditor been participating in the debtor’s business decisions? Was there any specific earmarking or other specification as to how the loan proceeds were to be used or applied?

27. Are there individual guarantors? Are any of the guarantors currently employed by the corporate obligor? In what positions?

If the Creditor Is a Bank or Savings and Loan, Ask the Following:

28. Has there been any setoff of the debtor’s accounts in the three months before the filing of the petition? Since then? Have any of the debtor’s accounts been frozen?

29. Has the creditor been an officer or a member of the board of directors or other managing body of the debtor, or had any ownership interest in the debtor during the period of credit transactions with the debtor?

30. If there is a guarantor or co-obligor, is, or was, the guarantor or co-obligor an officer, director, shareholder, or manager of the debtor?

31. Were there any instances over the year preceding the filing of the petition when the debtor gave the creditor any property other than payments made in the usual course of business? [If a revolving account, is there a ledger showing the course of charges and payments by the debtor?]

32. If so, did the creditor transfer to the debtor at that time any new services, a loan, goods, etc.

33. Did the creditor foreclose or repossess any of the debtor’s property recently? Was the value of the property credited against the debt? How much? Was the property resold? To whom? How much was paid for the property at resale? Was written notice of the date, time, place, and terms of the sale given to any person or entity? If so, to whom and when? (Ask for a copy of the notice given, and request any other facts which would demonstrate that the sale as conducted complied with state law.)

34. [If the debt was a purchase-money loan where recording of a lien is required.] What was the date of the debtor’s purchase(s)? Do you have any written documents showing this sale? What was the date on which you forwarded the [name of perfecting document] to [appropriate recording office]? If the creditor is a credit union, is it “a cooperative association” organized under the Federal Credit Union Act?

Avoidance/Redemption: Secured Creditor Only

35. If the debt is secured by a lien or security interest in household goods or furnishings, clothing, appliances, books, animals, crops, musical instruments, or jewelry, did the debtor use the collateral personally or in a business? Was the loan made to enable the debtor to purchase the collateral?

36. If the debt is secured by a lien or security interest in implements, animals, books, or tools, does the debtor or a dependent of the debtor use the collateral in a trade or profession? What is the present value of the collateral?

37. Has the debtor contacted the creditor about paying off or redeeming the collateral from the lien or security interest?

38. Has the creditor received any sort of written notice from the Bankruptcy Court regarding avoidance of the creditor’s lien?

39. Was any portion of the loan used by the debtor to buy the items of collateral?

40. If any part of the loan was originally used to purchase the collateral, has that portion been refinanced?

Fraudulent Transfers

40.5. Have there been any instances over the year preceding the filing of the petition when the debtor gave the creditor any property other than payments made in the usual course of business.

40.6. If so, did the creditor transfer to the debtor at that time any new services, a loan, goods, etc.?

40.7. Has the creditor repossessed any of the debtor’s property within the year preceding the filing of the petition? Was the value of the property credited against the debt? How much?Was the property resold? To whom? How much was paid for the property at resale?

Has the creditor reviewed the individual debtor’s Statement of Intent? Has the debtor or the debtor’s representative taken any action to carry out the terms of the Statement?

Exceptions to Discharge

41. Did the debtor ever provide you with a financial statement? (If yes, ask the creditor to provide a copy.) When was the statement submitted? Did any of the creditor’s employees provide any assistance to the debtor in completing the financial statement? Does the creditor have any reason to believe that the statement was inaccurate at the time it was submitted? Did the creditor conduct any credit review other than obtaining the financial statement? If so, were there any discrepancies noted? If so, were these discussed with the debtor? With what result? Were any new monies advanced, or the old loan renewed, modified, or extended at the time the financial statement was submitted?

42. Is this a consumer debt?

43. Has the debtor ever made any promises, statements, or representations concerning financial condition? What were they? Does the creditor have any reason to believe that the promises, statements, or representations were untrue? Were any new monies advanced, or the old loan renewed, modified, or extended at the time of such promises, statements, or representations?

44. [If the creditor has issued a credit card to the debtor] Were any charges made within a period of 90 days before the bankruptcy petition was filed? If so, what was the nature of the purchases? The merchant name? Were any cash withdrawals made in that time?

45. [If the creditor has issued a credit card, convenience check, or cash card to the debtor] What has the debtor’s charge or draw history been like? Has there been any “run up” of charges? Multiple charges in the same day? Change in spending patterns? Did the debtor make the first few payments in full and on time? Was there a written loan application?

46. In the 90 days before the bankruptcy petition was filed, did the debtor accumulate credit charges with the creditor that totaled more than $500? Cash advances of more than $750? Is there any indication that the debtor used all or any portion of a draw or convenience check to pay a federal tax obligation, or any federal governmental agency or unit?

47. If a judgment has been entered in connection with this debt, was there any finding of fraud, gross negligence, malpractice, embezzlement, defalcation, larceny, willful or malicious injury, or driving while intoxicated? If no judgment has been entered, has any suit for damages been brought against the debtor? Do you know if any sort of criminal proceeding for DUI or DWI is pending?

47.5. Is the obligation for the support or maintenance of a spouse, former spouse, or child of the debtor? If so, is there a written separation or dissolution agreement, court order or divorce decree, or territorial determination describing this obligation? [If so, request a copy of the writing or order.] Was there any agreement that your spouse or former spouse would pay any specific obligation in lieu of, or as part of, support or maintenance? If so, which obligation? Has the support or maintenance obligation been assigned or transferred to any governmental agency or unit for collection? If so, what is the name of the agency, and what was the reason for the assignment or transfer? Have you reviewed the budget that the debtor has filed in the bankruptcy proceeding? If the obligation includes payment to third parties as part of the support or maintenance agreement, does the budget indicate that the debtor can meet his or her basic obligations for support of the debtor and dependents of the debtor, together with the expenses of operating the business, and continue to pay the obligation to the third-party creditor?

48. Has the trustee, or anyone on behalf of the trustee, contacted you regarding using the collateral, or returning it to you? [If the collateral includes cash or cash equivalent] Has anyone asked you for your permission to use the collateral, sell it, or otherwise dispose of it? On what terms? Have you received anything in writing from the debtor about this? Have you responded? Do you think the trustee should be allowed to use your collateral? Why, or why not? What is the rental or use value of your collateral on a monthly basis?

49. [For individual debtors] What events, if you know, caused this filing? What are business conditions in the area? How likely is it that the debtor will be able to come out of this bankruptcy and resume a substantial income?

Lease Questions

50. [If real property] Has the debtor or the trustee contacted you about vacating the leased property? About retaining it under the existing lease terms? About renewing the debtor’s personal liability on the lease?

51. [If personal property] Has the debtor or the trustee contacted you about returning the leased property? About reaffirming personal liability on the lease and keeping the property?

52. Are there any monetary defaults under the lease? Is the leased property insured? Do you have a copy of the insurance policy naming you as a co-insured? Have you contacted the insurer to be sure the policy premiums are current? Is the property being maintained? Are there any other nonmonetary obligations under the lease which the debtor is not performing?

53. Had you filed any sort of eviction, detainer or replevin action before the petition date? Given any written notice of default? Did the court issue any kind of order or writ on the eviction or replevin? If so, what did the order or writ say? Have you delivered a copy of the order or writ to any constable or other law officer? Were or are you represented in the eviction or replevin suit?

54. [Ask for a copy of the lease, any default notices, any notice of the bankruptcy case, any judgment or eviction-related lawsuit, insurance policy, and account statement.

By Adam Hunt

Ohio Criminal Defense Attorney Adam Hunt
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