Alternative approach to defending against the Debtor's Exam

Today I had the unfortunate duty of representing a client at a debtor's exam.  "Unfortunate" because there are so many alternatives to forcing the debtor to go to court after judgment has been entered.  Talk about kicking someone when they are down.  My client was sued for breach of contract for failure to pay on a credit card.  The creditor (plaintiff in the lawsuit) became the "judgment creditor" after obtaining a judgment.  Instead of proceeding with the debtor's exam, I was able to convince the creditor's attorney to allow my client to answer questions about his assets via letter, but not before generating several hours worth of legal fees.  So now the real work begins, to wit: convincing my client to commit to a bankruptcy that will wipe out the debt! 

When a client, consumer or business, has debts in excess of its assets, I generally recommend a Chapter 7 bankruptcy, as opposed to attempting to defend the creditors lawsuit.  Especially when a well written contract contains legal fee and interest provisions that greatly increase the amount of the underlying debt.  The fees for bankruptcy run between $1,000 and $2,500.  The legal fees surrounding defending the underlying lawsuit and attending the hearing today only created additional unnecessary costs for my client, to the tune of about $3,500. 

The lesson for today: if you are facing a debtor's exam, call the plaintiff's attorney or judgment creditor to negotiate an informal disclosure of available assets, by way of a declaration under oath or affidavit.  This is more convenient that having to go to the court house and answer questions in the hall way and cuts down on the attorneys fees generated by the creditor's attorney.  Plus, the court does not want you down there eating up their time.  Filing a bankruptcy petition will "stay" or stop an ongoing litigation or even the post judgment process, such as the debtor's exam.



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Respectfully,
The Harmon Firm Legal Experts
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Alternative approach to defending against the Debtor's Exam