Many years ago a lawyer asked his client to list all of his bank accounts. So, the client did. He listed his checking account with the balance, his savings account with his balance; and his retirement account with its balance – $45,000. That was his retirement from Walmart, he told the lawyer proudly. So, that is a retirement account? Yep, sure is. Well, all forms of tax qualified retirement accounts are completely exempt in Oklahoma regardless of value. So, the lawyer scheduled it and went on.
At the First Meeting of Creditors the Trustee asked to see an account statement on the retirement account. The debtor produced one. Turns out this “retirement account” was an account that the debtor intended to be for his retirement. He had retired from Walmart, took his company stock out of his profit sharing plan and put it in an ordinary, investment account at Schwab.
That is not a tax-qualified, retirement account. Nor is there any available exemption for that Schwab account. The Trustee took that man’s Walmart stock, sold it, and distributed the funds to his creditors pro rata. If the lawyer had asked for the account statement, at a minimum, he could have advised the client on how to at least get a fighting chance at keeping that stock. Pre bankruptcy planning is more art than science, but there are some things that could have been done.
One of the things you should be paying a lawyer for is to make sure that when you answer a question, whether it is on his questionnaire or in an interview, that you understand the question and you understand your answer. Bankruptcy is a time when seemingly small details can make big differences. No lawyer can check everything, but saving our clients from the things they don’t realize are important is a big part of our job.
I was looking at some schedules today where the attorney’s questionnaire obviously asked the debtors if their debt was primarily business debt. They answered the question. He didn’t check the math. They may very well be right, but that hinges on the valuation of a claim they have listed as “unknown”. So, they either admit that this isn’t actually a business case (which means that they will have to complete and pass the means test (good luck on that, I’ve seen their income and expenses) and, they will also have to convince the US Trustee that their prospective budget is reasonable, and I wish them even more luck on that one; or, they are going to have to admit to a very large value on a claim against them that is probably not dischargeable.