Information About Bankruptcy
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A chapter 7 consumer bankruptcy petition relieves the
petitioner of most of his/her obligations to most creditors for debts that
arose prior to filing of the petition for bankruptcy. The following is merely
an introduction to this area of the law and is not intended to supplant the
use of an attorney to address the special needs of any one particular
bankruptcy petition. You should consult an attorney.
A chapter 13 petition best applies in a situation where the
petitioner owns real estate and can realistically continue the payments to
"catch up" on the debts while the arrearages are frozen so as to permit the
payments to advance.
Bankruptcy is filed in Federal Courts, not State courts. The general
purpose of the bankruptcy petition is to legally dismiss all or most of the
debts that the petitioner(s) has incurred. Certain debts can not, as per
Section 523 and 707 of the U.S. Bankruptcy Code, be discharged:
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:
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.
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.
e. Report any last minute changes of income/assets to your attorney. It may
be that when the petitioner first filed for bankrupcty he was unemployed and
now has employment that will be a basis for denying the bankruptcy.
- Taxes.
- Fines or penalties owed to the U.S. Government.
- Debts not listed in any prior bankruptcy petition.
- Alimony, maintenance, child support payments.
- Educational loans (State).
- Judgements related to court fines. Driving while intoxicated.
- Prior bankruptcy debts not waived.
- Debts arising from fraud, misrepresentations, etc.
- Debts owed due to crimes, larcery, etc.
- Debts owed due to malicious injuries
The creditor must take the appropriate action, in certain of these
debts, by filing an objection with the court. This objection must be
submitted within 60 dyas of the first date set for a meeting of the
creditors, wherein the creditor opts to request that the particular debts be
deemed not dischargeable, i.e., that the petitioner for bankruptcy be made to
pay this particular debts. [See Rule 4007(c) of the Code]. If the petitioner
disagrees with the creditor's objection, then a special hearing must be set
so that the Bankruptcy court determines the validity of the creditor's
objection.
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.
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.
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