One of the leading problems between those who file bankruptcy and those who have found a bankruptcy attorney to represent them is a lack of communications. Bankruptcy forum websites are full of bankruptcy clients asking questions their legal representatives either failed to answer or were never asked in the first place. Learn to communicate with your bankruptcy attorney!
An Illustration in Communication Failure with a Bankruptcy Attorney
A blogger recently wrote this story online: “In 2006 we filed our chapter 13 case. The attorney we hired told us to increase our federal withholding allowances so that we would not have a tax refund for that year. We followed and increased our allowances to 10 which gave us a larger net income amount. The case was confirmed on the larger net amount. We were not told by the attorney at the end of the year to lower our withholding at all. The next January the nightmare started. I figured out our federal taxes for 2007 and we owed nearly $6800! The next year we owed $3700 after all the belt tightening in the middle of the year. I finally had enough of my attorney and fired him. I hired a new attorney which helped us have a successful discharge. She immediately contacted the IRS to have the debt included in our case.”
Could the situation have been avoided with the first attorney? With a little communication from both sides, I suspect it could have been avoided.
What a Bankruptcy Attorney May Not Know
A bankruptcy attorney, if certified in their field of practice, should have experience and expertise in bankruptcy laws. That does not necessarily mean that a bankruptcy attorney has knowledge of the laws in another legal discipline such as tax laws.
It is a misdemeanor and federal offense to falsify withholding allowances. According to the IRS, a $500 fine can be applied to those who are prosecuted for knowingly raising allowances beyond a level that can be proven, resulting in less tax being withheld. If the IRS determines that an employee has falsified marital status or the number of dependents to pay less in taxes, the amount under-taxed is also likely to be sought.
In the case of the illustration, a tax attorney would possibly have known how to best help the bankruptcy client in dealing with their withholding problem in order to solve their taxing situation. That does not mean a bankruptcy attorney would necessarily know how to solve the same tax situation.
Maybe the bankruptcy attorney in this case simply told the client they should adjust their withholding in order to reduce their income to help the chapter 13 plan. That would have been a legitimate request, but regardless, there was a lack of communication between the client and attorney causing the final separation of their contract to do business.
A bankruptcy attorney has a legal and fiduciary responsibility to provide you with the legal information that is the basis for which you have hired them. Be upfront with your bankruptcy attorney from the get go, and learn how to communicate with them. Likewise, a bankruptcy attorney might want to recognize the limitations of the lay people whom they serve, and by doing so, they might learn to communicate better with them.
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