Bankruptcy Process
Automatic Stay
The moment you file your bankruptcy petition at the Clerk's Office, the law imposes an Automatic Stay that takes effect immediately. The automatic stay prohibits all creditors from taking any collection action against you (the debtor) or your property. Creditors must be advised that the Automatic Stay is in effect.
See the new bankruptcy law relating to Limits on Automatic Stay.
Notice to Creditors
Approximately two weeks after you file your petition, the clerk's office will send a Notice to Creditors, that you have filed for bankruptcy protection. Such notice will be sent to all the creditors you have listed on your mailing matrix. The notice also informs them of the date of the meeting of creditors.
If you need to notify any of your creditors sooner, you must give them notice of your bankruptcy filing yourself.
The exact information in the Notice to Creditors varies, depending on the chapter under which the case is filed. In chapter 7 cases involving an individual debtor, creditors generally have sixty (60) days from the first date set for the meeting of creditors to object to the discharge of the debtor and/or the dischargeability of a specific debt.
See the new bankruptcy law relating to Notice to Creditors.
Meeting of Creditors
Approximately two weeks after you have filed your bankruptcy petition, you will receive a notice from the Clerk's Office with the date and time of the first Meeting of Creditors.
A Meeting of Creditors is held in every bankruptcy case. The debtor must attend the meeting. In many cases it is the only meeting (or hearing) that the debtor must attend. It usually occurs between twenty and forty days after the date you file the original petition with the court.
In chapter 7, chapter 12, and chapter 13 cases, the meeting is conducted by the trustee whom the United States Trustee has assigned to your case. No bankruptcy judge is present at the meeting. In chapter 11 cases, where (usually) the debtor is in possession and no trustee is assigned, a representative of the United States Trustee's office conducts the hearing.
The hearing permits the trustee or representative of the United States Trustee's Office to review the debtor's petition and schedules with the debtor face-to-face. The debtor is required to answer questions under penalty of perjury concerning the debtor's acts, conduct, property, liabilities, financial condition, and any matter that may affect administration of the estate or the debtor's right to a discharge. This information enables the trustee or representative of the United States Trustee's Office to understand the debtor's circumstances and facilitates the efficient administration of the case.
The section 341 hearing is referred to as the "Meeting of Creditors" because creditors may attend and question the debtor about the location and disposition of assets and any other matter relevant to the administration of the case. However, creditors are not required to attend these hearings and, in general, do not waive their rights by failing to appear.
The hearing usually lasts a few minutes. The trustee or representative of the United States Trustee's Office may continue the hearing if he or she is not satisfied with the information the debtor provides.
If a husband and wife file a joint petition, they must both appear. If you have a problem attending the creditor's meeting, please contact your trustee. Since this meeting is set by the U.S. Trustee and not by the Clerk's Office, please do not file requests to continue or change the date of this meeting with the Court.
If the debtor fails to appear, the trustee or representative of the United States Trustee's Office may request that the Court dismiss the bankruptcy or order the debtor to cooperate or be held in contempt of court for willful failure to cooperate.
Repayment Plan
In a chapter 13 case, the debtor must submit a Repayment Plan. Creditors have an opportunity to object to the plan. If no one objects to the debtor's proposed plan, the Court will enter an order confirming the plan as filed. Once the plan is confirmed, the trustee will distribute the proceeds of the debtor's plan payments to creditors until the debtor completes the plan or the court dismisses or converts the case.
The Court will issue an order discharging the debtor, and the trustee will prepare a final report, once the debtor completes payments under the chapter 13 plan.
In a chapter 12 case, the confirmation hearing must be concluded within forty-five (45) days of filing the plan. The Court may consider dismissal of the case if a plan is not confirmed.
See the new bankruptcy law relating to Duration of Chapter 13 Plans.
Debtor's Conference
In a chapter 11 case, the United States Trustee holds a debtor's conference before the creditors' meeting. At the Debtor's Conference, the United States Trustee will go over the responsibilities and restrictions on the debtor-in-possession, explain the quarterly fees and monthly operating reports, and generally discuss the financial situation of the debtor and the scope of the anticipated plan of reorganization.
Reaffirmation Agreement
A Reaffirmation Agreement is an agreement by which a debtor becomes legally obligated to pay all or a portion of an otherwise dischargeable debt. In order to be effective and enforceable, the agreement must be filed in your bankruptcy case.
If the reaffirming debtor is not represented by an attorney, the Court will hold a hearing on the agreement. In some instances, the Court will hold a hearing even where the debtor is represented by counsel. The debtor must appear in person at the hearing.
The judge will ask questions to determine whether the reaffirmation agreement imposes an undue burden on you or your dependents and whether it is in your best interest. Since reaffirmed debts are not discharged, the Bankruptcy Court will normally permit you to reaffirm only secured debts where the collateral is important to your daily activities.
If you desire to reaffirm any particular debt, you must enter into a written agreement with the creditor. There are no forms for this purpose available from the Clerk's Office. If you purchased your bankruptcy forms and have an application for reaffirming a debt in your forms packet, do not file it with your petition. File it only after you and the creditor have both signed the reaffirmation agreement. Attach the agreement to the application and file it with the Court.
You may want to contact the creditor and have them prepare the reaffirmation agreement. It must be filed with the Court prior to the date in the Discharge of Debts section of the notice regarding your meeting of creditors. Since you are not represented by an attorney, a hearing, of which you will receive written notice, may be set before the bankruptcy judge. If filing jointly, you and your spouse both need to appear at the hearing so the judge may determine whether the reaffirmation agreement is in your best interest.
Please be advised that the Court does not need to approve a reaffirmation agreement that applies to a debt which is a consumer debt secured by real property. This applies to any mortgages on your home or other debts which are secured by your home.
Even if you sign a reaffirmation agreement, you have a minimum of sixty (60) days after you file the agreement to change your mind and rescind the agreement. If your discharge date is more than sixty (60) days after you file the agreement, you have until your discharge date to rescind the agreement.
If you reaffirm a debt and fail to make the payments as agreed, the creditor can take action against you to recover any property that secures the debt, and you will be personally liable for any remaining debt to that creditor.
See the new bankruptcy law relating to Reaffirmations.
Redeem Collateral
Some creditors may have liens on certain property. The lien holder has a special right to sell that property on which it has a lien, known as "collateral," and use the proceeds to satisfy its claim. The property "secures" the debt, so the lien holder is said to have a "secured claim." Generally, bankruptcy leaves a creditor's lien in place. This means that, despite the bankruptcy filing, the creditor can sell the collateral to satisfy its claim.
The Bankruptcy Code allows a debtor to Redeem Collateral. An individual debtor can keep certain kinds of collateral (tangible, personal property intended primarily for personal, family, or household use), by paying the holder of a lien on the property the amount of its "allowed secured claim," which typically means the lesser of the amount owed or the value of the property.
Without the option to redeem, a debtor could not keep the collateral without first entering into a reaffirmation agreement and becoming legally obligated again on the entire debt, even though it may exceed the value of the collateral.
The option to redeem applies only to property that a debtor has claimed as exempt or that the trustee has abandoned. With redemption, a debtor can often get liens released on personal household possessions for less than the underlying debt on those secured possessions. Unless the creditor consents to payments over time, a debtor must generally pay the redemption amount in one lump-sum payment to the creditor.
See the new bankruptcy law relating to Debtors Statement of Intent.
Bankruptcy Petition Amendments
If you want to amend your Bankruptcy Petition to include any creditors that you may have overlooked when filing your original schedules, you must file an amendment. Amendments to Schedules D, E or F require a $26 filing fee. The Clerk's Office does not have forms for this purpose. If you file an amendment, you must mail a copy to the creditors listed and to the trustee assigned to your case. Please note on the amendment that you have mailed a copy to the creditors listed.
