Bankruptcy Frequently Asked Questions

What is bankruptcy? Bankruptcy is a legal process which allows a person (a ” debtor”), who owes more money than he or she can currently repay to either (a) repay a portion of the money over time under Chapter 11, Chapter 12 or Chapter 13, or (b) have the entire debt forgiven (“discharged”) under Chapter 7. Under Chapter 7, a debtor may be required to surrender assets to a trustee.

Bankruptcy is also available to businesses, corporations and partnerships. Even municipal governments can file bankruptcy (under Chapter 9). After a debtor has filed a case (i.e., “petition”), creditors must stop all collection efforts against the debtor for a period of time, unless they get permission from the bankruptcy court to continue. This protection from collection efforts is referred to as the “automatic stay.” The Bankruptcy Code and Federal Rules of Bankruptcy Procedure determine which chapter one is eligible to file, which debts can be eliminated, how long repayment must continue, which possessions can be kept, etc. A debtor must abide by these federal laws and rules.

What is the Bankruptcy Code? The Bankruptcy Code is federal law. It refers to Title 11 of the United States Code (11 U.S.C. sections 101-1330).

How much does bankruptcy cost? In most consumer or personal bankruptcies, we are able to quote a “flat-rate” fee for legal services in filing a Chapter 7 or Chapter 13 petition. Our flat-rate fees are for the usual uncontested filings. There will be facts and circumstances that may produce situations where our flat-rate fees are not applicable such as objections and adversary proceedings. However, we can let you know if your case falls within our flat-rate guidelines when we speak with you. Please also keep in mind that all of our fees are in addition to any court costs.

What happens when a bankruptcy petition is filed? The commencement of a bankruptcy case creates an “estate.” The estate technically becomes the temporary legal owner of all of the debtor’s property. The estate consists of all legal or equitable interests of the debtor in property as of the date the case is filed, including property owned or held by another person if the debtor has an interest in the property. The “automatic stay” is immediately invoked at the instant of the filing of the bankruptcy case, and it prohibits creditors from taking collection action against the debtor or the debtor’s property without bankruptcy court approval. The court issues a notice of commencement advising all interested parties of the filing of the bankruptcy case. This notice provides the case number, trustee, date of the meeting of creditors, deadline to file a proof of claim (if applicable) and deadline to file an objection to the discharge (if applicable).

Do I need an attorney to represent me in my bankruptcy case? Each debtor filing an individual bankruptcy has a right to represent him or herself (pro se debtor); however, the use of an attorney is recommended. Ignorance of the law may cost an individual far more than an attorney’s fee. By law, a corporation is required to have an attorney. Note: Individuals who choose to represent themselves will not be able to obtain legal advice from court personnel or from the trustee appointed to their case.

What is a pro se debtor? pro se debtor is one who files bankruptcy without an attorney. A pro se debtor is responsible for all proceedings of his/her case. Failure to comply with the Bankruptcy Code and Rules or with court orders may cause dismissal of the debtor’s case. It is recommended that all debtors seek legal advice before filing bankruptcy.

Where can I obtain the necessary forms for filing bankruptcy? The court cannot supply forms. Forms are available from office supply stores or legal stationery stores. Forms are also available for printing by clicking here: Official Bankruptcy Forms.

What are the current filing fees for filing bankruptcy?

Chapter 7 $ 335
Chapter 7 – To Reopen $ 260
Chapter 9 $1,717
Chapter 9 – To Reopen $1,167
Chapter 11 $1,717
Chapter 11 – To Reopen $1,167
Chapter 12 $ 275
Chapter 12 – To Reopen $ 200
Chapter 13 $ 310
Chapter 13 – To Reopen $ 235
Chapter 15 (known as foreign proceeding (§304) prior to October 17, 2005) $1,717
Chapter 15 – To Reopen $1,167

The prescribed filing fee, if paid by the debtor, must be in the form of exact cash, cashier’s check or money order made payable to clerk, United States Bankruptcy Court. Additional information regarding filing fees can be found on the court’s website at: Bankruptcy Filing Fees.

Can the court waive the bankruptcy petition filing fee? 28 U.S.C. 1930(f)(1) provides that the court may waive filing fee in a case under Chapter 7 for an individual if the court determines that such individual has income less than 150 percent of the income of the official poverty line applicable to a family of the size involved and is unable to pay that fee in installments. The Bankruptcy Rules do provide for individuals to pay the filing fee in installments. To pay the fee in installments, you must submit an application, and the application must be approved by the court. This form is available by clicking here: Filing Fee Installment Form.

What must I do before I file my case? Pursuant to section 109(h)(1) you must complete and obtain a certificate from an approved nonprofit budget and credit counseling agency during the 180-day period preceding the date of filing.

What is the difference between a Chapter 7 bankruptcy, Chapter 13 bankruptcy and Chapter 11 bankruptcy?

In a Chapter 7, debtors are permitted to retain certain “exempt” property, while the remaining assets are liquidated by the trustee. The trustee will distribute the funds from the liquidation to holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Accordingly, potential debtors should realize that the filing of a petition under Chapter 7 might result in the loss of nonexempt property.

Chapter 13 is designed for individuals with regular income to repay a portion or all of their debt over an extended period of time. Chapter 13 may be appropriate for debtors who seek to retain certain assets through a repayment plan.

Chapter 11 allows corporations, partnerships and certain individuals who do not qualify under Chapter 13, to reorganize without having to liquidate all assets. As in a Chapter 13, the debtor (called the “debtor-in-possession” because a trustee is not normally assigned) is required to present a repayment plan. If the plan is accepted by the creditors and subsequently approved (“confirmed”) by the court it allows the debtor to reorganize his or her or its personal, financial or business affairs. NOTE: For further information on these Chapters, click here: General Information.

How is a debt classified as secured, unsecured, priority or administrative? A secured debt is a debt that is collateralized by property. A creditor whose debt is “secured” has a right to foreclose or take property to satisfy a “secured debt.” For example, a mortgage loan is likely “secured” by a debtor’s home. This means that the

lender has the right to foreclose upon and take the home if the debtor fails to make the loan payments. An unsecured debt arises when you promise to repay someone a sum of money at a particular time, but you have not pledged any property as collateral for the debt. A priority debt is a debt entitled to priority in payment, ahead of other debts. Please refer to 11 U.S.C. §507 of the Bankruptcy Code for a listing of such priority claims. An administrative debt is a category of priority debt. Generally, it is created when someone provides goods or services to your bankruptcy estate after you file your petition. An example of an administrative debt is the fee charged by an attorney or other authorized professional for services rendered after the bankruptcy case has been filed.

When do I receive a discharge of my debts? The notice of the section §341 Meeting of Creditors reflects a date by which all complaints objecting to discharge or dischargeability of debts must be filed. If the debtor has complied with all of the filing requirements, paid the filing fee in full and pursuant to section 727(a) (10) completed an instructional course concerning personal financial management, and if the debtor has filed the proper certification reflecting completion, your discharge will be entered in due course after the expiration of the date stated earlier.  See Bankruptcy Timelines.

What debts are dischargeable? Generally, all debts listed on the petition are dischargeable. This includes unsecured debts such as credit card and charge card balances, medical bills and judgments that are not secured by collateral. Some back taxes can be discharged under the right circumstances.

However, certain types of debt listed in 11 U.S.C. §523 are not dischargeable. The non-dischargeable debts listed in §523 include:

  • Certain taxes and fines
  • Debts arising from certain fraudulent conduct
  • Debts not listed in your bankruptcy petition
  • Alimony, child maintenance or support, and certain other related debts arising out of a divorce decree or separation agreement
  • Debts caused by the debtor’s willful and malicious injury to another
  • Government guaranteed student loans
  • Debts caused by a death or personal injury related to your operation of a motor vehicle while intoxicated
  • Post-bankruptcy condominium or cooperative owner’s association fees

This list includes only examples of nondischargeable debts; see 11 U.S.C. § 523 for a complete list. Under § 523, a creditor or party in interest may also file a complaint to have their debt declared nondischargeable. In a Chapter 13 case, the discharge is broader under 11 U.S.C. § 1328(a).

What is a bankruptcy discharge? It releases the debtor from personal liability for discharged debts. Thus, it prevents the creditors owed those debts from taking any action against the debtor to collect the debts. Most, but not all, types of debts are discharged if they existed on the date the bankruptcy case was filed and were listed on the schedules. Some of the debts that are not discharged are discussed in question 15. Bankruptcy law regarding the scope of a discharge is complex, and debtors should consult competent legal counsel prior to filing.

Can a discharge be denied? Under certain circumstances, 11 U.S.C. § 727 provides that the debtor’s discharge may be denied in a Chapter 7 case. Grounds for denial exist when the debtor: (1) failed to keep or produce adequate books or financial records (2) failed to satisfactorily explain any loss of assets (3) committed a bankruptcy crime such as perjury (4) failed to obey a lawful order of the bankruptcy court or (5) fraudulently transferred, concealed or destroyed property that would have become property of the estate. Refer to § 727 for a complete list.

What is the role of a trustee assigned in a Chapter 7 or Chapter 13 case? Under Chapter 7, an impartial trustee is appointed to administer the case by collecting and liquidating the debtor’s nonexempt assets in a manner that maximizes the return to the debtor’s unsecured creditors. Under Chapter 13, an impartial trustee is also appointed to administer the case. The primary role of the Chapter 13 trustee is to determine the feasibility of a debtor’s repayment plan for the court and to serve as a disbursing agent, collecting payments from debtors and making distributions to creditors.

What is the function of the U. S. trustee? The office of the U. S. trustee is an agency of the Department of Justice, with responsibilities that include monitoring the administration of bankruptcy cases and detecting bankruptcy fraud. It is also responsible for appointing and supervising interim trustees to administer Chapter 7 cases, overseeing the debtor-in-possession, and appointing a standing trustee in Chapter 13 cases.

What is a 341 meeting? This meeting is referred to as the “meeting of creditors.” All creditors are notified so that they may attend, but their attendance is not required. Debtors have a duty to appear and testify under oath and answer questions by creditors. This meeting is presided over by the trustee assigned to the case and is held approximately 40 days after the petition is filed. Debtors are required to provide photo identification and proof of Social Security number to the assigned trustee. A debtor’s failure to appear may result in dismissal of the case. If a continuance or change in the hearing date is sought, the trustee assigned to the case must be contacted.

How long does a bankruptcy filing remain on my credit report? A maximum of 10 years under provisions of the Fair Credit Reporting Act.

How do I get a bankruptcy filing removed from my credit report? The bankruptcy court has no jurisdiction over credit reporting agencies. The Fair Credit Reporting Act, 6 U.S.C. § 605 is the law that controls credit reporting agencies. The law states that credit reporting agencies may not report a bankruptcy case on a person’s credit report after 10 years from the date the bankruptcy case is filed. You may contact the Federal Trade Commission, Bureau of Consumer Protection, Education Division, Washington, D.C. 20580; their phone number is 202-326-2222. That agency can provide further information on re-establishing credit and addressing credit problems. You can also directly contact the credit bureau(s) reporting the information – e.g., Equifax, Experian, TransUnion.

What is an adversary proceeding? What do I need to file when filing an adversary proceeding with the court? An adversary proceeding is a lawsuit arising in or related to a bankruptcy case. It is commenced with the filing of an adversary proceeding cover sheet, complaint, summons and the filing fee of $250, if applicable.

What can I do if a creditor keeps trying to collect money after I have filed bankruptcy? You should immediately notify the creditor in writing that you have filed bankruptcy and provide them with the case name, case number and filing date or a copy of the petition that shows it was filed. If a creditor continues to attempt to collect, the debtor may be entitled to take legal action against the creditor to obtain a specific order from the court prohibiting the creditor from taking further collection action. However, a formal motion must be filed, in accordance with the Bankruptcy Code and applicable Rules. If the creditor is willfully violating the automatic stay, the court can hold the creditor in contempt of court and fine the creditor. Any such legal action brought against the creditor will be complex and will normally dictate representation by a qualified bankruptcy attorney.

What should I do if I cannot make my Chapter 13 payment? If the debtor cannot make a Chapter 13 payment on time pursuant to the terms of the confirmed plan, the debtor should contact the Chapter 13 trustee by phone and by letter advising the trustee of the problem and whether it is temporary or permanent. If it is temporary, the debtor should advise the trustee of the time and manner in which the debtor will make up the payments. So long as the trustee agrees, the payments can be made up over time. If the problem is permanent and the debtor is no longer able to make payments under the plan, the trustee will request that the case be dismissed or converted to another Chapter, or the debtor may seek to modify his or her plan. The determination of whether to modify the plan or dismiss or convert a case requires legal analysis. The debtor should seek counsel from a qualified bankruptcy attorney before attempting to make a decision on how to proceed in their case.

My ex-spouse has filed bankruptcy. He/she has listed me as a co-signer on a scheduled debt. What can I do? Does my divorce decree protect me? If you are a co-debtor with your ex-spouse on a debt, the creditor can require the entire payment of that debt from your share of the marital property, even though the divorce decree assigns the debt to your ex-spouse. Depending on the terms of your divorce decree, you may be able to have certain support obligations determined to be nondischargeable by the bankruptcy court or in state court. You should seek legal advice for a thorough explanation of your rights and obligations in this area as soon as you find out that your ex-spouse has filed bankruptcy.

A company has filed for bankruptcy and owes us money. What do we do? If you have been listed as a creditor in a bankruptcy case and you received a proof of claim form from the bankruptcy court, make sure to complete the form and file it with the court by the required date. You must attach any documentation that supports your claim. If you wish to have a conformed copy returned to you, please enclose an extra copy and self-addressed, stamped envelope. If you were not listed as a creditor, you may obtain a claim form from the bankruptcy court.  NOTE: Information regarding when a claim will be paid should be directed to the trustee assigned to the case, whose name and telephone number can be found on the 341 meeting notice.

How do I obtain a proof of claim form? Proof of claim forms can be obtained at the clerk’s office of the bankruptcy court. You may send a written request with a stamped, self-addressed envelope to the clerk’s office.

What is a reaffirmation agreement? A reaffirmation agreement is an agreement between the debtor and a creditor that the debtor will pay all or a portion of the money owed, even though the debtor has filed bankruptcy. In return, the creditor promises that, as long as payments are made, the creditor will not repossess or take back its collateral. This means that the debtor will remain personally liable on that debt.

What is a motion? A motion is a written formal document in which the party, the movant, who is requesting an action, sets forth his or her grounds for the action requested. The party against whom the action is requested is the respondent.

How do I get a hearing date? It is not necessary to contact the court for a hearing date. Upon receipt of properly filed documents, a hearing will be set automatically and proper notice of the hearing date and time will be given to interested parties.