FAQs for Debtors

  • Where can I get more information?

    For more guidance on bankruptcy matters, please visit the Self Help section of the Court’s website and The National Association of Chapter 13 Trustees Frequently Asked Questions page .

  • DEBT, How do I know if a debt is secured, unsecured, priority or administrative so I can fill out my schedules correctly?

     A. Secured Debt

    A secured debt is a debt that is backed by property. A creditor whose debt is"secured" has a right to take property to satisfy a "secured debt." For example, most homes are burdened by a "secured
    debt." This means that the lender has the right to take the home if the borrower fails to make payments on the loan. Most people who buy new cars give the lender a "security interest" in the car. This means that the debt is a "secured debt" and that the lender can take the car if the borrower fails to make payments on the car loan.

    B. Unsecured Debt

    A debt is unsecured if you have simply promised to pay someone a sum of money at a particular time, and you have not pledged any real or personal property as collateral for that debt.

    C. Priority Debt

    A priority debt is a debt entitled to priority in payment, ahead of most other debts, in a bankruptcy case. A listing of priority debts is given, in general terms, in 11 U.S.C. § 507 of the Bankruptcy Code. Examples of priority debts are claims for domestic support obligations, some taxes, and wage claims of employees. If you have questions deciding which of your debts are entitled to priority status, you should consult an attorney.

    D. Administrative Debt

    An administrative debt is also a priority debt and is one created when someone provides goods or services to your bankruptcy estate. The best example of an administrative debt is the fees generated by attorneys and other authorized professionals in representing the bankruptcy estate.

  • EXEMPTIONS, What are exemptions?

     

    11 U.S.C. § 522(b) allows an individual debtor to exempt real, personal, or intangible property from the property of the estate. Exempt assets are protected by state law from distribution to your creditors. Typically, exempt assets include vehicles up to a certain dollar amount, the equity in your home up to a certain amount, and tools of the trade.

    Exemptions are claimed on Schedule C. As with all schedules, it is important to fully complete and provide all the information requested. If no one objects to the exemptions you have listed within the time frame specified by the bankruptcy court, these assets will not be a part of your bankruptcy estate and will not be used to pay creditors through your bankruptcy case.

    Deciding which assets are exempt and how and if you can protect these assets from your creditors can be one of the more important and difficult aspects of your bankruptcy case. It is extremely important to consult an attorney if you have any questions regarding the issue of exempt assets.

  • DISCHARGE, What is a discharge?

     

    The discharge order is issued by the court and permanently prohibits creditors from taking action to collect dischargeable debts against the debtor personally; this does not prevent secured creditors from seizing collateral if payments are not kept up, or other creditors from pursuing property of the estate.

    Some debts are not dischargeable, and others may be found to be non-dischargeable depending on particular circumstances.

    In a chapter 7 case, the bankruptcy court will order that the debtor be discharged of all dischargeable debts once the time for filing complaints objecting to discharge has expired unless:

    a. the debtor is not an individual;
    b. a complaint objecting to the debtor's discharge has been filed; or
    c. the debtor failed to complete an instructional course concerning personal financial management;
    d. the debtor has a previous discharge within the past 8 years;
    e. the debtor has filed a waiver of discharge.

    In chapter 11 cases, if the debtor is an individual, a discharge must be granted by the Court after all payments are complete, or, at least, the amounts paid are not less than the amount that would have been paid under a chapter 7 liquidation; otherwise, the confirmation of a plan of reorganization discharges the debtor from dischargeable debts that arose before the date of the order of relief unless:

    a. the plan or order confirming plan provides otherwise; or
    b. the plan is a liquidating plan and the debtor would be denied a discharge in a chapter 7 case under 11 U.S.C. 727.

    In chapter 12 and chapter 13 cases, the court will order that the debtor is discharged of dischargeable debts after the debtor has completed all payments under the plan, all domestic support obligations are certified as current and has completed a financial management course, or prior to plan completion, after notice and hearing, if the requirements of 11 U.S.C. §§ 1228(b) or 1328(b) have been met.

    The granting of a discharge does not automatically result in the closing of a case. All contested matters, adversary proceedings, and appeals must be resolved and the appointed trustee or debtor-in-possession must file a final report and account and request entry of a final decree before the Clerk's Office will close the case.

  • DISCHARGE, Do I have to do anything else to receive my discharge?

     The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 includes several new bars to the granting of a discharge. For example, all individual debtors must complete an instructional course concerning personal financial managements, and submit a certification of completion. Chapter 13 debtors must certify that any domestic support obligations are current. In some circumstances, a case may be closed without the discharge being granted. If that happens, the debtor will have to pay a fee to reopen the case and file the missing documents to get the discharge.

  • DISCHARGE, What debts are dischargeable?

     11 U.S.C. § 523 lists exceptions to discharge. In general, all other debts are dischargeable.

    Some debts listed in 11 U.S.C. § 523, such as those based on fraudulent conduct, embezzlement or willful and malicious injury to another, are discharged unless a complaint to deny discharge of that debt is timely filed with the bankruptcy court. Ordinarily, these complaints must be filed within sixty (60) days of the first date set for the meeting of creditors.

    Additionally, debts that were not listed on your bankruptcy schedules or that were incurred after you filed bankruptcy are generally not discharged.

  • DISCHARGE, Does every Debtor get discharged of every debt?

    A discharge is a court order that forgives a debtor of certain specific debts. The discharge order prohibits a creditor from attempting to collect from a debtor a debt that has been discharged. However, not all debts are dischargeable. Parties can file written requests (adversary complaints) to have the court determine if a debt is dischargeable.

    • Creditor, Trustee or US Trustee asks the Court to determine if there is a discharge
    • Some unsecured debts are not dischargeable because Congress has determined they are types of debts that should not be discharged because of public policy reasons. These debts are listed in Section 523 of the Bankruptcy Code.  Examples are:
      • Spousal and child support obligations;
      • Certain tax debts;
      • Most educational loans
      • Debts related to injuries or death caused by driving while intoxicated; and
      • Debts arising from fraudulent conduct.
    • It is also possible for a debtor to be denied a discharge of all unsecured debts if a debtor has not been honest, forthcoming, or cooperative in the bankruptcy case. These scenarios are listed in Section 727 of the Bankruptcy Code and usually involve the U.S. Trustee, a trustee, or a creditor filing a lawsuit in a chapter 7 bankruptcy case to determine that the debtor should be totally denied a discharge.
    • Debts that are secured by real or personal property are not dischargeable. For example, a creditor may be able to seize property even after a discharge is granted because the debtor has not kept up with payments. Even though the creditor may not collect on the unsecured portion of the debt, the property can still be foreclosed upon (residence, automobile, etc.).
    • Debtor asks the court to determine if a debt can be discharged -- Some creditors have obtained court judgments, and then filed a "lien" which can be used to sell property of the debtor. In some situations, a debtor may file a motion asking the court to remove such a lien. Also, a debtor may file an adversary proceeding asking the court to rule that other debts are dischargeable.
  • DISCHARGE, What is the difference between a denial of discharge and a debt being non-dischargeable?

     Denial of a discharge applies to all debts of the debtor’s bankruptcy estate, while determination of non-dischargeability applies to a particular debt only. A request for denial of discharge is usually granted because the debtor has defrauded a creditor, concealed property of the estate, made a false oath, presented or used a false claim, refused to obey any lawful order of the court and other reasons contained in the Bankruptcy Code.

    On the other hand, non-dischargeability of a debt excepts a particular debt from the discharge. This means that if the debt is determined non-dischargeable the debtor is still obligated to that creditor.

  • DISCHARGE, What is the difference between a denial of discharge and a debt being non-dischargeable?

     Denial of a discharge applies to all debts of the debtor’s bankruptcy estate, while determination of non-dischargeability applies to a particular debt only. A request for denial of discharge is usually granted because the debtor has defrauded a creditor, concealed property of the estate, made a false oath, presented or used a false claim, refused to obey any lawful order of the court and other reasons contained in the Bankruptcy Code.

    On the other hand, non-dischargeability of a debt excepts a particular debt from the discharge. This means that if the debt is determined non-dischargeable the debtor is still obligated to that creditor.

  • BANKRUPTCY AFFECT, What Can Bankruptcy Do for Me?

     Bankruptcy may make it possible for you to:

    •  Eliminate the legal obligation to pay most or all of your debts. This is called a“discharge” of debts. It is designed to give you a fresh financial start.
    • Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
    • Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
    • Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
    • Restore or prevent termination of utility service.
    • Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
  • BANKRUPTCY AFFECT, What Bankruptcy Can Not Do

     Bankruptcy cannot cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to: 

    • Eliminate certain rights of “secured” creditors. A “secured” creditor has taken a

    mortgage or other lien on property as collateral for the loan. Common examples are

    car loans and home mortgages. You can force secured creditors to take payments

    over time in the bankruptcy process and bankruptcy can eliminate your obligation to

    pay any additional money if your property is taken. Nevertheless, you generally can

    not keep the collateral unless you continue to pay the debt.

    • Discharge types of debts singled out by the bankruptcy law for special treatment, such

    as child support, alimony, certain other debts related to divorce, most student loans,

    court restitution orders, criminal fines, and some taxes.

    • Protect cosigners on your debts. When a relative or friend has co-signed a loan, and

    the consumer discharges the loan in bankruptcy, the cosigner may still have to repay

    all or part of the loan.

    • Discharge debts that arise after bankruptcy has been filed.
  • BANKRUPTCY AFFECT, What are the consequences of filing bankruptcy?

    Depending on a debtor's financial situation and reasons for filing, the consequences of filing for bankruptcy protection may outweigh the benefits.   Those considering bankruptcy should be aware of the following:

    • Filing for bankruptcy protection is not free.  Please refer to Fee Schedule
    • Not all debts are dischargeable.

    Example:  Secured creditors retain some rights which may permit them to seize property, even after a discharge is granted.   Spousal and child support obligations, most student loans and most tax debts are not dischargeable.

    • Within 14 days of the filing of the bankruptcy petition, schedules of the debtor’s assets and liabilities must be filed.   Failure to timely file the appropriate schedules may result in dismissal of the case and the barring of the debtor from filing again for 180 days (six months).   11 U.S.C. §521 mandates that a chapter 7 or chapter 13 case “shall be automatically dismissed effective on the 46th day after the date of filing of the petition” if the debtor fails to file “all information required by 11 U.S.C. §521(a)(1)” within 45 days of filing.
    • If the case is dismissed and a discharge is entered by the court, the debtor is prohibited from being granted another discharge in chapter 7 and 11 within six years.
    • Fraudulent information or acts by the debtor are grounds for denial of a discharge and may be punishable as a criminal offense.
  • BANKRUPTCY AFFECT, If I file for bankruptcy, will it stop an eviction?

    The Clerk's Office is prohibited by federal statute from providing legal advice. If you have any questions on how a bankruptcy filing affects enforcement of an eviction proceeding, please contact your legal advisor.

  • CREDIT REPORT, How do I get a bankruptcy removed from my credit report?

    The Bankruptcy Court has no jurisdiction over credit reporting agencies. The Fair Credit Reporting Act, 6 U.S.C. Section 605, is the law that controls credit reporting agencies. The law states that credit reporting agencies may not report a bankruptcy case on a person's credit report after ten years from the date the bankruptcy case is filed. Other bad credit information is removed after seven years. The larger credit reporting agencies belong to an organization called the Associated Credit Bureaus. The policy of the Associated Credit Bureaus is to remove chapter 11 and chapter 13 cases from the credit report after seven years to encourage debtors to file under these chapters.  

    You may contact the Federal Trade Commission, Bureau of Consumer Protection  in Washington, D.C. by calling (202) 326-2222. This office can provide further information on reestablishing credit and addressing credit problems.  For information on credit practices, contact (202) 326-3224.http://www.ftc.gov/about-ftc/bureaus-offices/bureau-consumer-protection

  • Credit Counseling vs. Personal Financial Management, What Are the Differences?

    An individual debtor must complete TWO DIFFERENT CLASSES to obtain a discharge. The names for these courses are: 1) Credit Counseling; and 2) Personal Financial Management. The courses are different in two ways: (a) When the class must be taken; and (b) What type of individual debtor must take the class. If a bankruptcy case is filed jointly, each spouse must take both courses.

    CREDIT COUNSELING, Before Filing For Bankruptcy – The Bankruptcy Code ordinarily requires an individual debtor (not a business debtor) to complete an approved course in Credit Counseling within 180 days before filing a bankruptcy case. See list of courses approved by the U.S. Trustee (link is external). The course can be completed in person, over the internet, or by telephone, and the credit counseling service will provide a certificate that the course was completed.

     PERSONAL FINANCIAL MANAGEMENT, Very Soon After Filing for Bankruptcy - In order to obtain a discharge of debts, an individual debtor (not a business debtor) must complete an approved course in Personal Financial Management within 60 days after the 341(a) Meeting of Creditors. See list of courses approved by the U.S. Trustee. (link is external) The course can be completed in person, over the internet, or over the telephone, and the course provider will provide a Certificate of Completion.

     

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