Information About Bankruptcy

A "discharge" in bankruptcy means that the bankruptcy petition has been granted by the court, i.e., that the petitioner does not owe certain moneys to certain debtors or that the plan can proceed as presented. Thus, the petitioner is "discharged" of those debts applicable. Thus, the following would then generally apply:

	a. Any judgment for money against you is invalid.  
	   Section  5249a)(1)

	b. Any creditor who attempts to take a collection against 
	   you would be in violation of the law. 

Nevertheless, the creditor still has some remedies against the petitioner in bankruptcy. For example, repossesssion (of a vehicle) or foreclosure (of a house). Certain creditors, aware that bankruptcy severely limits their options, decide to a reaffirmation agreement, provided that the same is workable and acceptable to the court. A reaffirmation agreement lets the petitioner keep a debt by way of agreeing to re-sign on to the debt and to keep up the new payments to date. (see below).

Other persons can be affected by a petition for bankruptcy: co-debtors. A creditor can legally pursue the moneys owed him by way of a lawsuit for a lien or garnishment, or other legal methods, against the co-signer to the petitioner's debt. Thus, a co-signer may be obligated to pay the debt. Rule 524(e) of the Code. The co-signer or co-debtor could enter into a new agreement with the creditor or also consider bankruptcy.

WHAT IS A REAFFIRMATION AGREEMENT?

A reaffirmation agreement is a written contract between the creditor and the petitioner wherein a debt is repaid even though the debt(s) could be discharged. The agreement must approved by the court. If the petitioner does not agree, then the item or collateral (usually consumer goods) can be repossessed by the creditor and sold to satisfy the debt to some degree.

The reaffirmation agreement must clearly state that the debtor may rescind the agreement at any time prior to discharge or within 60 days after the agreement is filed with the court, whichever occurs later. Section 524(c)(2) of the Code.

The reaffirmation agreement must be filed with the Court and approved. If the debtor is represented by an attorney, the attorney must file a declaration or affidavit that the agreement to reaffirm is signed voluntarily and with full knowledge of its consequences and that the agreement does not impose an undue hardship on the debtor or a dependent of the debtor. Section 524(c)(3) of the Code.

The petitioner may later rescind the reaffirmation agreement by simply notifying the court. The petitioner should also notify the creditor of the intentiont to cancel. No court order is required to approve the cancellation.

If a debt is reaffirmed, and the reaffirmation agreement is not terminated within the 60 day period described above, the debt is deemed to not be discharged and the petitioner will thus remain personally liable to pay the debt.

With reference to keeping the residential house, no written agreement is necessarily required if the petitioner and creditor desire to reaffirm the mortgage on the property. Section 524(c)(6)(B). If the trustee, the overseer in bankruptcy matters who obtains legal control of the disposition of the properties, is not selling the residence to obtain cash for any equity above the petitioner's exemptions, and if the secured creditor has no right to foreclose on the mortgage or otherwise elects to give up that right at the appropriate time, the petitioner can then simply continue to pay the mortgage and thus keep the house. The petitioner must always maintain the regular house payments as well as the additional arrears payments.

CAN I KEEP A CREDIT CARD?

Yes, but the petitioner must reaffirm and report this creditor on the list of creditor on the petition. The petitioner must inform his attorney and the court of all his/her creditors as it is the ultimate responsibility of the applicant to inform his attorney of the details. If the petition must later be amended, then a court amending fee must be paid, and additional attorney's fees.

WHAT DOES THE ATTORNEY NEED TO GET STARTED?

The following list is not a final or comprehensive list since each case varies but is intended as a general introduction to the items needed with the petition.

    A. A detailed list of all the creditors, in alphabetical order, 
       detailing the name, exact address, amount owed on principal and 
       loan/account numbers.
 
    B. The last three regular pay stubs (or worker's compensation, 
       disability,etc)

    C. The last two years tax returns. 

    D. A list of ALL monthly income: salary, child support, second 
       employment, lawsuit settlements, second business, etc. 

    E.  A list of ALL monthly expenses: rent.mortgate, utilities, food, 
	medical, auto insurance, medical insurance, transportation, gas, 
	personal loans, child support payments, dues, etc. 

    F.  Copies of the residential deed, title, etc. 

HOW MANY TIMES CAN A PERSON FILE FOR BANKRUPTCY?

A person can not obtain a second bankruptcy in Chapter 7 within 6 years of the first bankruptcy. Section 524(c)(6)(B) of the Code. The petitioner can, however, start a bankruptcy under chapter 13 and find that he can not keep up on the arrearages, for example, and later file a chapter seven and obtain a "total" bankruptcy, within a period of 6 years.

WHAT HAPPENS AT THE SECTION 342 HEARING WITH THE TRUSTEE?

The bankruptcy trustee is a representative of the Court who is usually a more experienced bankruptcy attorney. The waiting period at the hearing room, unfortunately always slow, is often about one to five hours. The trustee asks questions directly of the petitioner regarding whether the petition is true and accurate, under oath, what caused the petitioner to file for bankruptcy, have there been any changes since the filing, what moneys and assets are presently available, etc.. You should inform the Court and your attorney if you will need an interpreter. If the petition is for a married couple, a joint petition, then only one party may answer the questions.

The usual reason(s) for the filing of a bankruptcy is/are: poor financial planning, illness or disability, unemployment, fire loss, business losses, etc.

A chapter 7 hearing is often held at a different location from a chapter 13 in some regions. Make sure you know exactly where your hearing will be held.

CAN I GET CREDIT WHILE UNDER BANKRUPTCY?

Certain creditors will undertake the risk of offering conditional credit to a petitioner under bankrupcty. You should exercise great discretion in using this new credti since it may become the basis for a new credit line or more financial difficulties.

WHAT ARE SOME DO'S AND DONT'S?

a. Do not attempt to file bankruptcy when you have maxed your credit within the past three months prior to filing for bankruptcy since this gives the appearance, even if erroneously, of attempting to defraud the creditors. The trustee will consider bankruptcy depending on how much money or assets are coming to you so that even a personal injury case can become the reason for denying the bankruptcy since there perhaps the real expectation of assets which may be sufficient to pay off all the debts.

b. Provide the attorney with a list of ALL your creditors, even those who have two names and addresses. A failure to name a creditor may require an amendment to the bankruptcy, which will mean for filing costs and attorney's fees.

c. Make sure you can prove that the amount of rent, utilities, food, dental, insurance, etc. and other expenses are what the petitioner claims they are.

d. Provide all prior names and proper social security number.