Q: Why File For Bankruptcy?

A.)An individual generally files for bankruptcy in order to obtain one or more of the following benefits:

(1) have certain debts discharged completely or sort out which debts are dischargeable from those debts which will still be owed;
(2) receive extra time to pay debts;
(3) receive a break from creditor calls while debt relief is arranged;
(4) have the assistance of a trustee to pursue lawsuits or other claims that the debtor owns so that the money obtained can be used to pay creditors; or
(5) Eliminate certain judgment liens if those liens impair an exemption.

B.) A business files for bankruptcy to obtain similar benefits, including the possibility of operating the business while debt relief is arranged. A business other than a sole proprietorship is not entitled to receive a discharge of debts in a chapter 7 case.

There are negative consequences of filing for bankruptcy, and these may outweigh the benefits. For example, a potential debtor may need to resolve one debt (such as a mortgage), but if the home does not have any equity, there may not be any benefit to filing for bankruptcy. It is highly recommended that an individual or business owner who is considering filing for bankruptcy consult with a bankruptcy attorney to learn how a bankruptcy may affect its financial situation.

Q: Can I Still File for BankruptcyUnder the New Law?

The new bankruptcy laws went into effect on October 17, 2005. These laws do not prevent a debtor from filing bankruptcy, though the new bankruptcy laws contain some differences.

The main procedural difference is in the information that a debtor must provide to the bankruptcy court in order to open a bankruptcy case and to obtain a discharge.

Other differences include:
(1) how long an individual must wait to obtain a discharge if the debtor had a prior bankruptcy;
(2) the income level required in order to obtain a discharge in a chapter 7 case;
(3) how long the Automatic Stay lasts; or
(4) the procedure for reaffirming a debt on an automobile or a credit card.

It is highly recommended that an individual or business owner consult with a bankruptcy attorney to learn how the changes in bankruptcy laws may impact the particular financial situation.

 

Q: What Does A Debtor Have to Do After Starting a Bankruptcy Case?

After starting a bankruptcy case, a debtor must stay closely involved with all activities in a bankruptcy case until a discharge is received AND the bankruptcy case is closed. In some ways, bankruptcy is like a deal that Congress has made with a debtor. If a debtor follows the bankruptcy rules and meets certain financial tests, a debtor obtains debt relief. But if a debtor does not pay attention to the bankruptcy case and does not follow the bankruptcy rules, rights will be lost, benefits delayed, and if the bankruptcy case is closed without a discharge being entered, a debtor may have to pay extra to reopen the bankruptcy case to achieve the debt relief desired. In some situations a bankruptcy case may be dismissed.

Q: If I had a Prior Bankruptcy, How Soon Can I get Another Discharge?

If this is not a debtor’s first bankruptcy case and the debtor received a discharge of any debts in a prior case within the last eight years, the debtor may not be entitled to a discharge in the current bankruptcy case. It depends upon the chapter number of the prior bankruptcy case, the chapter number of the current bankruptcy case, and the number of years that elapsed between the date that a prior bankruptcy case was filed and the date that the current bankruptcy case was filed. It is important to consult a bankruptcy attorney and to refer to Section 727(a) and Section 1328(f) of the Bankruptcy Code.

Q: How long will bankruptcy remain on my credit report?

A bankruptcy can remain on your credit report for ten years.

Q: Will Filing for Bankruptcy Stop an Eviction?

Depending on the facts, the Automatic Stay may or may not prevent a landlord from evicting a tenant that has filed bankruptcy. For information about the Automatic Stay, see FAQ Before Filing #9. Consult with a bankruptcy attorney for information on how a bankruptcy filing affects enforcement of an eviction proceeding

Q: What are the Names of the Different Bankruptcy Forms?


Petition Package – This is a compilation of all forms required to start a particular chapter bankruptcy case. 

Petition – The document called a “Petition” is the official request to open a bankruptcy case, and the Petition contains basic information about a debtor’s contact information, attorney, chapter number, and signature.

Other Forms – While a Petition opens a bankruptcy case, this is only the beginning of the process. Approximately thirty (30) more documents are required so that the court and trustee knows how to properly treat a debtor and the debtor’s financial situation:

These documents have various titles including: “Schedules (A to J),” “Exhibits (C and D)” and then a combination of other forms titled “Statements,” “Declarations,” “Summary,” “Disclosure,” “Verification,” “Notice,” “Debtor’s Certification,” “Plan” (chapter 13 only), and “Venue Disclosure” (chapter 11 only). It requires time and organization to fill out all of the forms and be educated on the bankruptcy process, so please budget enough time to gather the information and complete the petition package documents before you need to file a bankruptcy case.

Q: Wrong Schedule, Statement, Plan, or Other Form is Used?

It is a debtor’s duty to ensure that the correct version of a document is filed with the bankruptcy court. If a debtor discovers that the wrong version was filed, that debtor should fill out the correct version together with the court-approved Amendment Form, and file them both with the court. The Amendment Form will be listed separately on the electronic bankruptcy case docket and lets the trustee and creditors know that a new version of a form has been filed. Sometimes the court will send a notice to a debtor, which points out that an incorrect version of a form has been filed and sets the deadline to file the correct version.

Q: Will I lose my Social Security payments if I file?

No. Your Social Security payments will not be lost.

Q: How can I Protect My Personal Identification?

General Privacy Policy – The Judicial Conference privacy policy addresses the protection of individual privacy in the context of access to electronic case files. Effective December 1, 2003, the policy requires that personal identifiers, such as Social Security numbers, financial account numbers, dates of birth, and names of minor children be redacted. A debtor and others who file documents with the court are responsible for redacting personal identifiers from documents filed with the court. Neither the clerk’s office nor bankruptcy judges are responsible for this.