Bankruptcy is a legal process that allows an individual or business to have certain debts reduced or discharged. Bankruptcy should be a last resort because it may have significant consequences and will remain on the debtor’s credit report from anywhere between seven to ten years.
How Do I File for Bankruptcy?
In order to initiate the bankruptcy process, the debtor has to file a bankruptcy petition with the federal bankruptcy court. This petition is a collection of forms that contain a list of the debtor’s:
- Liabilities; and
- Other information required by the court to make its decision.
After filing the petition, the judge will review the petition and will decide whether the debtor meets the eligibility requirements for declaring bankruptcy. Any additional forms or documents that are not provided at the time of filing must be provided to the court no later than 14 days of the petition filing date.
If the court grants the petition, the case will be assigned to a court trustee who holds a meeting of the creditors. The debtor will attend this meeting in order to discuss their property and debts with the court trustee.
The debtor must also file any objections or motions they have against their creditors’ claims as well as complete the forms that detail their repayment plan. Before their debts can be discharged, the debtor must complete a second debtor education course.
Once the debtor completes all of these steps, the court will either issue a discharge order or dismiss the petition. Debtors who receive a discharge order are no longer obligated to pay their discharged debts.
In addition, the order acts as a protection measure against creditors, because it takes away their collection rights.
How Does Consumer Bankruptcy Work?
When an individual or a business cannot pay their debts, a legal process called bankruptcy is initiated. There are numerous different categories of bankruptcy, called chapters, that are all governed by federal law.
When an individual cannot repay the debts they have accrued for their personal necessities, then they can file for personal bankruptcy. Once the process is complete, the individual will no longer be responsible for the obligations that they incurred.
The bankruptcy court may issue a discharge order that exonerates the debtor. After this, the individual’s financial situation should be improved.
However, the bankruptcy will remain on the debtor’s credit report for up to 10 years. This means that the effects of a bankruptcy may be long lasting.
In a situation that involves severe financial difficulties, bankruptcy should only be used as a last resort. Prior to declaring bankruptcy, an individual should consider all possible consequences.
It may be helpful to consult with a bankruptcy attorney, who can review the situation and provide advice regarding whether bankruptcy is a good option.
Can I Omit Certain Information on My Bankruptcy Paperwork?
When an individual first files for bankruptcy, they are required to submit paperwork to the Bankruptcy court. Part of this paperwork is a complete list of the individual’s income, assets, and expected future windfalls, such as inheritances.
While it may be tempting for an individual to omit some of this information, it is very important to be honest when filing bankruptcy paperwork.
What are the Consequences of Submitting Incomplete or Incorrect Bankruptcy Paperwork?
If a bankruptcy court suspects that the information an individual has provided is not complete, there is a good chance that their case will be dismissed. They may then be prohibited from re-filing in bankruptcy court.
If the bankruptcy court believes that an individual was dishonest, the result may be even more detrimental than their current debt crisis. In addition to their case being dismissed they may be prosecuted for bankruptcy fraud.
The punishment for bankruptcy fraud can be very serious, as jail time is a common punishment.
What is Bankruptcy Proceeding Immunity?
When an individual is filing for bankruptcy, the Federal Bankruptcy Act requires the debtor, or the individual who is filing for bankruptcy, to submit to an examination by their creditors. The purpose of this examination is to obtain information about the debt and other assets owned by the debtor.
Because it is critical that the court obtain thorough and truthful information, the Bankruptcy Act provides limited immunity to protect the testifying debtor.
What Immunity is Provided in Bankruptcy?
Immunity is offered to an individual who is testifying to help ensure that they can testify without the fear of criminal prosecution. The level of immunity that is provided by the Bankruptcy Act is equivalent to the 5th Amendment protection against self-incrimination.
This means that neither the testimony itself nor any evidence that was directly or indirectly derived from the testimony can be used against the debtor in a criminal proceeding.
What is the 5th Amendment Privilege against Self-incrimination?
The Fifth Amendment of the United States Constitution provides that no individual shall be compelled to be a witness against themselves in any criminal case. This has been interpreted to mean that:
- The privilege against self-incrimination only applies to humans and does not exist for corporations;
- This privilege applies only in criminal cases and cannot be used in a civil case, with some exceptions;
- Compelled to be a witness only applies when there is a risk of imprisonment for refusing to testify or produce documents;
- The prosecution and court are not permitted to infer that a refusal to testify means an individual is guilty; and
- Individuals in certain specific types of relationships are granted immunity from testifying against each other, including, but not limited to:
- spousal relationships;
- lawyer-client relationships; and
- doctor-patient relationships.
What is not Protected by Immunity?
Bankruptcy immunity does not extend to anything beyond the oral testimony of the debtor. This means that non-testimonial evidence, such as schedules filed, books, or records can be used for criminal prosecution against the debtor.
Immunity protection is only provided for past acts or crimes that are admitted to during the debtor’s testimony. This immunity does not include protection for perjury or false swearing during testimony.
Any debtor who commits perjury, or false swearing, may be criminally prosecuted and that incriminating testimony, as well as all other testimony, can be used as evidence.
Who is Protected by the Immunity?
Immunity for testimony is only provided to the individual who is filing for bankruptcy. Testimony that is provided by other witnesses may be used in criminal proceedings against the debtor.
Bankruptcy proceedings are under the jurisdiction of the federal courts and all immunity is provided within the federal court. Courts have been split as to whether this immunity extends to state proceedings.
Do I Need a Bankruptcy Attorney?
Bankruptcy proceedings may be complex and overwhelming. It may be helpful to consult with a bankruptcy lawyer who can advise you of the possible consequences of filing for bankruptcy and the effects it will have on your future.
There are several chapters of bankruptcy that may be available to you. Your attorney can advise you of the consequences of each and whether you are eligible to file for them.
If you are concerned about criminal prosecution as a result of your testimony or any other testimony, seeking advice from an attorney is the best protection. This is especially true regarding the application of the immunity protection for your specific case.