Paralegal Tip #4: Don’t rely on bankruptcy software to make exemption decisions for you
I shot an arrow into the air, it fell to earth, I knew not where”
Exemptions Quiz:
You’re in your bankruptcy software and you’ve just entered an asset. You click the appropriate button or tab to assign an exemption and the software highlights an exemption statute. You click to confirm the statute, enter or verify the value, and by this action have now assigned the exemption to the asset. Is this the correct or incorrect exemption for this client’s asset?
A. Must be. It’s what the software showed as the correct choice.
B. I’m sure it is. I apply exemptions the same way for all of our clients.
C. I don’t know. Exemptions are too difficult to understand. I leave them for the attorney to figure out.
D. Yes, it’s correct. I identified the applicable state for this client and determined which set of exemptions they were eligible to use (state, federal, or either). I made sure the associations between property type and statutes were reviewed and correctly set in the software. I double-checked that the total of the exemptions I applied did not exceed allowed limits.
Obviously, D. is the only correct answer unless, as in the case of C., the attorney has directed the paralegal to not work with exemptions. (The attorneys I work with all expect the paralegal to be able to take the steps listed in D.)
Choices A. and B. are as good as guesses. The worst is A. because none of the bankruptcy software programs are designed to interpret and analyze all of the variables in a case and provide the “correct choice” when it comes to exemptions. Best Case® Bankruptcy even gives a disclaimer (located in the software in help topics under exemptions):
… We do not prevent you from selecting statutes that do not seem to apply. We have provided the statutes and limits to save the user time, but in many cases the exemption laws are complex, subject to interpretation, or restricted to certain cases. …
The other problem with A. is that if you assign exemptions as you go, then first-entered is going to be first-exempted. This is not always in the best interest of the client.
And, finally, while B. might work for 99% of your clients, it’s that one client who is not eligible for your default state’s exemptions that’s going to be exempted incorrectly.
So the moral of the story is that exemptions require thinking outside the “bankruptcy software.” Become proficient at determining exemptions. Here’s how:
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