Bankruptcy and Legal Malpractice – the “Fresh Start” You Did Not Get

When you file for personal bankruptcy, you are looking for, and under US law entitled to, a “fresh start.”  That can backfire if you retain counsel to help you with the Petition and Schedules and your attorney fails to protect your rights.

There are many ways your attorney can commit legal malpractice in the bankruptcy context.  We have outlined a few below.  A personal bankruptcy, especially a Chapter 7 should be a simple and easy route to a “fresh start”.  With some planning you should not be obligated to pay back any of your unsecured creditors.  However, when mistakes happen in federal Bankruptcy Court, they can be costly.

Bankruptcy Homestead and Legal Malpractice

A common mistake in filing a personal bankruptcy is to neglect the Homestead exemption.  In Massachusetts, you can have up to $500,000 of equity in your home, declare a “Homestead” and exempt all of that from your creditors (except the mortgage lender).  This is a valuable exemption and one that is generally used for homeowners.

However, if your attorney neglects to inform you of the Homestead exemption and how to file for one, or fails to check with the Registry of Deeds, or fails to check the Registry carefully, you can loose the exemption and the bankruptcy will become far less valuable, because of legal malpractice.

Filing a Homestead is easy.  It is cheap.  And it is very effective, in bankruptcy and in protecting your assets from creditors otherwise.  You should do it, have your attorney check it, and protect your home; usually our client’s most valuable asset, and easiest to protect.

Bankruptcy Lawyer Neglects to List Creditors

Completing and filing the Bankruptcy Petition and Schedules is complicated.  It is possible to do without an attorney but not advisable.  For an attorney who claims to undertake personal bankruptcy for clients, he or she should be able to complete and file a Bankruptcy Petition and Schedule with all necessary information.  This is especially true for listing all of the creditors of the client.

The names, addresses, account numbers and amounts owing are all listed on Schedule F for unsecured creditors.  The are other Schedules for secured creditors (such as homes and cars) and priority creditors (such as student loans and taxes).  Neglecting to list all creditors can result in a loss of rights for the client.  Why do this?  Isn’t this easy?  How can this happen?

We have heard “reasons” for neglect that range from “new software” to the client didn’t inform us.  However, we always use a credit report and match it with all of a client’s bills.  We also go through one year of our clients’ bank statements.  Using this “belt and suspenders” approach, we catch it all.  Furthermore, before our clients sign the Petition and Schedules, we review it with them.  Finally, BEFORE the 341 Creditors’ hearing, we do so again:  if there is a “new” problem, we inform the Trustee and correct it, on the record, and follow up by immediately amending the Schedule.

Retaining Competent Counsel in Bankruptcy Malpractice Cases

Some attorneys will say they do bankruptcy and not know how.  Some will know how, but have an associate, or paralegal, undertake the work and that person does not know how.  Some attorneys are having personal issues and not focused, so important attributes of your case are neglected.

In any event, you are entitled to pre bankruptcy planning.  You are entitled to knowing that all of your unsecured debts will be discharged.  You are entitled to reaffirm, or give up, your secured debts.  You are entitled to knowing the probable result of you bankruptcy.  It’s not like a divorce or criminal case in which the other side and witnesses can and will change their positions.

Our Legal Malpractice and Bankruptcy Experience

We have been representing victims of bankruptcy malpractice for decades.  We stand up to malpractice insurance companies, and their aggressive counsel in the Massachusetts state courts.  We have the experience in representing victims who started out thinking they would get a “fresh start” but were startled to learn that their attorney failed to undertake proper bankruptcy practice and lost them significant rights.

Call us for a free consultation.