The initiation of a bankruptcy proceeding occurs with filing a bankruptcy petition with the office of the bankruptcy court representing the debtor’s area of residence, payment of the required fee, and receipt of a court order that initiates the bankruptcy proceeding. This is a form of involuntary bankruptcy that a group of creditors will use to file a bankruptcy claim against an individual. The court will inform the creditor that you have applied for court protection.
If you have named the IRS as a creditor in your bankruptcy, the IRS will receive an electronic notice of your bankruptcy from the US Bankruptcy Courts within a day or two of the petition’s filing date. Due to the advanced stage where emergency petitions are often filed, debt collection action can begin before the clerk can send letters to creditors informing them of the bankruptcy filing. When the petition has been filed with the court, creditors are notified and can object if they wish.
When you voluntarily file a petition, a federal court will automatically suspend action to stop most debt collection actions against you. Filing for bankruptcy on an emergency basis involves filling out some basic forms to obtain a bankruptcy case number and start an automatic withholding collection effort. Filing for bankruptcy prevents most creditors from accessing your income or taking debt collection action against you while bankruptcy is pending. Once a debtor files for bankruptcy, the automatic stay prevents creditors from taking action to collect the debtor’s debts.
A Chapter 7 waiver is usually granted about four months after the debtor files for bankruptcy. Under Section 109 of the Bankruptcy Code, debtors who voluntarily waive their bankruptcy after a creditor has filed for automatic suspension cannot file for bankruptcy again for 180 days. In the event of bankruptcy, all of the debtor’s assets are liquidated under the control of the creditors, although the law provides for debt restructuring options similar to those provided in Chapter 11 of the US Bankruptcy Code. Bankruptcy begins with a declaration by the debtor, which is more common, or on behalf of creditors, which is less common.
All debtors require some documents, while others depend on the bankruptcy chapter of the debtor files. There may be other requirements, such as copies of tax returns filed or amended during the bankruptcy process, as required by law or requested by a court, trustee, or creditor. Some bankruptcy courts may have additional requirements, such as a written disclosure statement or electronic copies of your documents. Not all types of bankruptcy require a bankruptcy trustee, but Chapter 7 and Chapter 13 situations do. A Review of the letter you received from the trustee after you filed.
If the debtor is a partnership or corporation, the legal representative must file for bankruptcy. If the application is not submitted by the debtor, it must include all the names used by the debtor that are known to the applicants. If the debtor is a partnership, all general partners must agree to bankruptcy in order to voluntarily file. Disclosure is due to the fact that after filing for bankruptcy, creditors, not the debtor, must decide whether a particular asset has value.
The bankruptcy filing lists the assets, liabilities, and debts of the debtors so that you can develop a realistic mechanism for paying your creditors. The declaration of bankruptcy has an immediate legal effect on the assets of the debtor and his creditors. Upon successful completion of the bankruptcy procedure, the debtor is released from debt obligations that arose prior to filing the petition.
Bankruptcy does not release the debtor from the obligation to file all necessary tax returns and pay taxes due in the bankruptcy proceedings. Failure to file and/or pay current taxes at the time of bankruptcy may result in the debtor being declared bankrupt.
If the Debtor’s bankruptcy filing is filed before the Debtor receives the settlement, the Department will take all necessary action to collect all of the debtor’s tax liabilities. After the Department has received a bankruptcy notice, it may file a request for evidence in bankruptcy court listing the debtors’ debts to the Department. Bankruptcy includes all debts prior to filing a petition (these are known as prepaid debts).
Sometimes a petition must be amended to correct an error, or because the plaintiff has acquired rights to money or property after the petition was included in the bankruptcy estate. In rare cases, in less than 1% of cases, the debtor’s creditors may file an involuntary application (Form B-5, Involuntary Application), but only in SS303(a) Chapter 7 or Chapter 11, which Litigation is required. After a petition is filed, the court schedules a hearing at a 341 meeting or a meeting of creditors where the bankruptcy trustee and creditors review the petition and plan of support, ask questions of the plaintiff, and may challenge exceptions they believe are inappropriate.
The personal debtor or official representative of the non-personal applicant must sign the petition under perjury, admitting the consequences of lying in court, hiding property, or committing bankruptcy fraud. To be eligible to file for consumer bankruptcy under Chapter 7, the debtor must qualify under a legal “wealth test.” Before consumers can seek liquidation in Chapter 7 or Chapter 13 bankruptcy, debtors must receive credit counseling from an approved counseling agency and be trained in personal financial management from these agencies before filing for bankruptcy. First, in most cases, you will need to complete a court-approved pre-bankruptcy credit counseling course with a certificate of completion at least one day before filing for emergency bankruptcy.
If you don’t have time to fill out the lengthy paperwork, you can file a simple petition called an emergency bankruptcy, emergency, or general petition. Depending on the type of bankruptcy filing, filing for bankruptcy can help you get out of your legal obligations to pay your debts and keep your home, business, or finances functioning.« Back to Glossary