What Is Bankruptcy?
Types of Bankruptcy
This information is what is provided by the Trustees office and is required to be given to each debtor prior to filing. Please review this carefully.
The Bankruptcy Code is divided into chapters. The chapters that usually apply to consumers are Chapter 7, where most or all of your debt is wiped out, and Chapter 13, which involves a repayment plan. In most cases, once you file your case, the “Automatic Stay” goes into effect. The Automatic Stay means that a bankruptcy filing automatically stops, or stays, and brings to a halt most lawsuits, repossessions, foreclosures, evictions, garnishments, attachments, utility shut-offs, and collection harassment. Generally, most creditors cannot take any further action against you or your property without permission from the Bankruptcy Court.
Chapter 7 is designed for debtors who are having financial difficulties and are not able to repay their debts. If your current monthly income is above the State Median Income you will be required to perform a Means Test to determine if you are eligible for this type of bankruptcy relief. If you do not meet the requirements of the Means Test then you may be precluded from filing a Chapter 7 and have the option of converting to Chapter 13 or filing a Chapter 13. Under Chapter 7 a Trustee takes possession of all your property. You may claim certain property as exempt under the applicable state law. You can only exempt the value of property that is not subject to the liens of your creditors. The Trustee then liquidates the non-exempt property and uses the proceeds to pay off your creditors according to priorities of the Bankruptcy Code.
The purpose of filing a Chapter 7 is to obtain a discharge of most of your existing debts. If, however, you are found to have committed certain kinds of improper conduct described in the Bankruptcy Code, your discharge may be denied by the Court, and the purpose for which you filed the bankruptcy petition will be defeated The filing fees charged by the court for a Chapter 7 total $299.00. Even if you receive a discharge, there are some debts that are not discharged under the law. Therefore, you may still be responsible for such debts as certain taxes and student loans, alimony and support payments, criminal restitution, and debts for death or personal injury caused by driving while intoxicated with alcohol or drugs. Under certain circumstances you may be able to keep property that you have purchased subject to a valid security interest. Some of these options include what is called redemption and the reaffirmation of an existing pre-bankruptcy debt.
Chapter 13 is designed for individuals with a regular and stable source of income who are temporarily unable to pay their debts but who desire to use their best efforts and good faith to pay them in installments over a period of time under the protections afforded by the law. You are only eligible for Chapter 13 if your debts do not exceed certain dollar amounts set forth in the Bankruptcy Code. The filing fees charged by the court total $274.00 for a Chapter 13. Under Chapter 13 you must file a plan with the Court to repay your creditors all or part of the money that you owe them, using your future earnings or by the disposition and/or abandonment of certain collateral such as land and motor vehicles. You are protected from your creditors in most cases upon the filing of your case but your plan must be approved (“confirmed”) by the Court before it can take effect.
Chapter 11 is designed primarily for business reorganization, but is available to consumers. Its provisions are quite complex. In almost all cases, Chapter 11 is unnecessary and too expensive for consumer debtors. The court filing fee is $1039.00. Chapter 12.
Chapter 12 lets family farmers repay their debts over time and is similar to Chapter 13. The court filing fee is $274.00.
Reputable credit counselors can advise you on managing your money and debts. They may also be able to develop a plan to repay your debts. Unfortunately, some credit counselors are not reputable and charge high fee and contributions that will cause you to fall deeper into debt and damage your credit rating. Furthermore, many misrepresent their non-profit status and/or their affiliations with religious or charitable organizations, and are little more than collection agents fur credit card companies. Under the changes to the Bankruptcy Code that took effect in 2005, you are required to take two short credit counseling courses, one called a Pre-bankruptcy Briefing before you file bankruptcy, and one called a Debtor Education Course after you have filed. We will refer you to courses that have been approved by the United States Trustee.
Honesty is required. A person who knowingly and fraudulently conceals assets or makes a false oath or statement under penalty of perjury in connection with a case under the bankruptcy code shall be subject to fine, imprisonment, or both. All information supplied by a debtor in connection with a case under the bankruptcy code is subject to examination by the Attorney General.
- All information that you are required to provide with a bankruptcy petition and thereafter during your case is required to be complete, accurate and truthful.
- All assets and all liabilities are required to be completely and accurately disclosed in the documents filed to commence the case, and the replacement value of each asset, as deferred in section· 506 of the Bankruptcy Code, must be stated in those documents where requested after reasonable inquiry to establish such value.
- Current monthly income, the amounts specified in section 707(b) (2) and. in a case.under chapter 13 of this title, disposable income (determined in accordance with section 707(b) (2», are required to be stated after reasonable inquiry; and
- Information that you provide during your case may be audited pursuant to the Bankruptcy Code, and failure to provide such information may result in dismissal of the case or other sanction, including a criminal sanction.
What Do I Need To File Bankruptcy?
NOTE: A person who knowingly and fraudulently conceals assets or makes a false oath or statement under penalty of perjury in connection with a case under the bankruptcy code shall be subject to fine, imprisonment, or both. All information supplied by a debtor in
- We pull your credit report and obtain all your creditors from that source. You will then need to complete the Best Case “My Case Info” on line. We will provide you your credit report, but we must list everyone you owe (even debts you will pay) with the following information:
- Complete name and address of ALL creditors. ALL means ALL. Don’t just list the name and address of a collector or attorney. List the name and address of BOTH the creditor and any collector or attorney. Remember, you do not owe the collector; you owe who they are collecting for. Also list any relatives. A shoe box full of bills is not acceptable.
- Approximate date of the debt, what it was for (type of debt) and account number (if there is an account number). If you have many accounts with a single creditor (a doctor, for instance) you need only list the creditor once and can put down “multiple” under account number.
- Amount you owe – does not need to be exact for purposes of this appointment.
- Your income tax returns for last 2 years – both personal & business and pay stubs for the last 60 days. Income taxes must be current and remember that if you have a tax refund coming, the trustee will take that and distributing it to the creditors.
- Lawsuit papers for any suits in the last two years, including collections, divorces and foreclosures.
- Letters from any collection agent or attorney and most recent statements/bills from your creditors.
- Copies of financial statements you have given to any lender in the last 5 years.
- Life insurance policies, burial policies and your most recent retirement account statement(s).
- All credit cards. To avoid fraud allegations, stop use of credit cards immediately.
- The case number, court location and date filed of any prior bankruptcies
- Registrations (or Titles) to all vehicles (including mobile homes).
- Bring a recent, typical pay check stub. If you file bankruptcy, we will need your last 6 months of income information (such as pay stubs) before filing your case.
- A list of all your transactions of the last two years involving money or property valued at $100 or more (anything bought, sold, given away or traded: include when, what and who).
- Legal description from a deed, title insurance or mortgage of any real estate you own or are buying. The description on your property tax statement is not adequate.
- Name and address of any co-signer or co-debtor.
- List of your assets with your estimate of their replacement value in their current condition. Look at the county appraisal for any real estate you have an interest in. Include any checking or savings account numbers, address of the bank and amount in the account. IMPORTANT-ANY FUNDS IN THESE ACCOUNTS ON THE DATE OF FILING WILL BELONG TO THE TRUSTEE. MAKE SURE ALL OUTSTANDING OBLIGATIONS HAVE CLEARED THE ACCOUNT BEFORE THE CASE IS FILED.
Important Information About Bankruptcy Assistance Services
If you decide to seek bankruptcy relief, you can represent yourself, you can hire an attorney to represent you, or you can get help in some localities from a bankruptcy petition preparer who is not an attorney. THE LAW REQUIRES AN ATTORNEY OR BANKRUPTCY PETITION PREPARER TO GIVE YOU A WRITTEN CONTRACT SPECIFYING WHAT THE ATTORNEY OR BANKRUPTCY PETITION PREPARER WILL DO FOR YOU AND HOW MUCH IT WILL COST. Ask to see the contract before you hire anyone.
The following information helps you understand what must be done in a routine bankruptcy case to help you evaluate how much service you need. Although bankruptcy can be complex, many cases are routine. An attorney can help guide you through this intricate process, making it easier and less stressful for you.
Before filing a bankruptcy case, either you or your attorney should analyze your eligibility for different forms of debt relief available under the Bankruptcy Code and which form of relief is most likely to be beneficial for you. Be sure you understand the relief you can obtain and its limitations. To file a bankruptcy case, documents called a Petition, Schedules and Statement of Financial Affairs, as wen as in some cases a Statement of Intention need to be prepared correctly and filed with the bankruptcy court. You will have to pay a filing fee to the bankruptcy court. Once your case starts, you will have to attend the required first meeting of creditors where you will be questioned by a court official called a “trustee” and, much more rarely,by creditors.
If you choose to file a chapter 7 case, you may be asked by a creditor to reaffirm a debt. You may want help deciding whether to do so. A creditor is not permitted to coerce you into reaffirming your debts. It may not be in your best interest to reaffirm a debt.
If you choose to file a chapter 13 case in which you repay your creditors what you can afford over 3 to 5 years, you may also want help with preparing your chapter 13 plan and with the confirmation hearing on your plan which, if held, will be before a bankruptcy judge.
If you select another type of relief under the Bankruptcy Code other than chapter 7 or chapter 13, you will want to find out what should be done from someone familiar with that type of relief. However, please be advised that in most cases, you will only be concerned with chapter 7 and chapter 13.
Your bankruptcy case may also involve litigation. You are generally permitted to represent yourself in litigation in bankruptcy court, but only attorneys, not bankruptcy petition preparers, can give you legal advice.