I got a phone call the other day from someone interested in filing a Chapter 7 bankruptcy case. He asked me to lower my fee. "It's just a simple case," he said.
Famous last words. It turns out that this particular caller had some ins and outs to his case that have the potential to make it a very long, complicated, drawn out case.
So what can possibly cause a Chapter 7 case to get complicated?
Not paying rent and not having a mortgage -- this is a red flag. The trustee will want to know how this is possible. If you are living free of charge, who is it that owns the place where you live, and to what extent are they supporting you. And if that person can offer you free rent, it is possible that the trustee will want to see more information from them, such as their income and expenses. The point is to see if you are giving money to them that you aren't reporting to the bankruptcy court, or if there is some reason that your benevolent host could possibly be a source of income for you as well.
Real estate -- if you are upside-down on your house (meaning you owe more than the current value), it's pretty easy to make a case for keeping you in the house. However, if you are at, or close to the homeowner's exemption level, it can get complicated super fast. you need to be able to prove the value of the home, which often means getting a proper appraisal. Remember: the court does not accept internet valuations from sites such as Zillow or Redfin. Somehow -- some way -- you are going to have to find a way to pay for an appraisal of your house.
Having a spouse, but filing separately -- I get it. You don't want to drag your life partner through a bankruptcy if the debt was mostly yours. However, if your credit takes a hit, your spouse's credit may also take a hit. And the trustee will likely need to see a clear accounting of the income and expenses that are yours, and the income and expenses that are your spouse's. It's actually easier for the two of you to get a fresh start together.
Having multiple cars -- it's pretty easy to exempt one car. It's even possible to exempt two cars. It is very difficult to exempt three cars. If you have an adult child who has a car, it might be time to have a serious conversation about expenses.
None of these complications are deal breakers, but they signal that you might not exactly sail through the 341 meeting without having to provide more documentation.
The secret to all of this is to disclose EVERYTHING about your income and expenses, your living situation, your job, and assets to your attorney before you file.