In general, the term “bankruptcy” refers to a legal proceeding in which an individual or entity files paperwork with a federal bankruptcy court requesting that certain debts against them be reduced or discharged. There are many different Chapters of bankruptcy that a person or entity may file for, but all Chapters either aim to eliminate specific debts completely or give a debtor extra time to reorganize and pay off their existing debts.
An emergency bankruptcy filing involves many of the same aspects and procedures as that of a standard bankruptcy case. However, the act of filing itself only requires the necessary forms as opposed to having to file all that is required in a regular bankruptcy filing.
Although the rest of the forms will eventually need to be submitted to the court (usually within 14 days after the initial filing), an emergency bankruptcy petition can immediately stop a collection action from occurring within the same day (e.g., repossession of property).
Also, do not confuse an emergency bankruptcy filing with a “rush filing” because they have different meanings. An emergency bankruptcy filing is primarily used as a strategy when an automatic stay is needed immediately. On the other hand, a “rush filing” refers to how quickly the court can expedite the paperwork.
In other words, a “rush filing” allows you to file bankruptcy immediately, but without the promise of receiving an automatic stay on the same day. If these definitions seem confusing or you have more questions about the bankruptcy process, you should speak to a local bankruptcy lawyer for further advice.
When Can an Emergency Bankruptcy Filing Be Used?
There are certain scenarios in which filing for an emergency bankruptcy may be necessary. Examples of these are when an automatic stay is required immediately to help prevent the following collection actions from occurring, such as:
- Foreclosure of a home;
- Car repossession;
- Creditor lawsuits; and/or
- Wage garnishments.
Although it is not necessary to point to a specific emergency, it does help to prove that there is a real case and that the debtor genuinely needs relief from debt and is not simply abusing the court’s powers.
Emergency bankruptcy filings are also sometimes referred to as a “skeleton filing” or a “bare bones bankruptcy filing” due to the minimum amount of paperwork that needs to be filed. In other words, only the “bare bones” requirements of a bankruptcy case need to be met in an emergency situation.
In general, bare bones bankruptcy cases typically involve filing the following items:
- An emergency bankruptcy petition;
- A list of the names and addresses of all creditors (this requirement may vary depending on the jurisdiction);
- A “Statement of Social Security Number” form;
- A “Certificate of Completion” of credit counseling (or waiver request); and
- The debtor will need to either pay the mandatory filing fee, request to pay the fee in installments, or request a fee waiver.
A debtor must still comply with the remaining requirements found in all bankruptcy cases, but a skeleton filing will buy them some time and keep creditors at bay while they are compiling the rest of the documents.
How Does a Debtor File for Emergency Bankruptcy?
After compiling all financial records and listing all relevant property, assets, liabilities, expenses, and so forth, the first step that a debtor must take to initiate the process is to file a petition with the federal bankruptcy court in their district. Depending on the jurisdiction, this petition may either be called a “Voluntary Petition”, an “Emergency Bankruptcy Filing Form”, or an “Emergency Bankruptcy Petition”.
Once the emergency bankruptcy petition is filed, the court will typically grant an order for an automatic stay within the same day. This means that the order will be enforceable as soon as it is issued. An automatic stay is basically an injunction that temporarily blocks creditors from pursuing collection actions, such as evicting a debtor, suing them in court, and/or calling or sending them letters requesting payments for the debt that is owed.
After this petition is filed, a debtor will also have a certain period of time (usually around 14 days) to complete and file additional bankruptcy forms and paperwork. For instance, a debtor may need to submit documents, such as a list of income and expenses, property or asset accounts and linked statements (e.g., investment accounts), and certificates that prove they received and completed the mandatory counseling sessions.
If a debtor fails to submit these documents within the allotted time frame, then the court can dismiss their bankruptcy case without discharging any of their debts. When this happens, a debtor will need to pay extra filing fees and court costs to reopen the case. Additionally, if the court believes that a debtor is abusing the bankruptcy process, it may also issue sanctions against the debtor.
The remainder of the emergency bankruptcy filing process will progress in the same way as a standard bankruptcy filing.
What are the Benefits and Limitations of Emergency Bankruptcy Filings?
Before filing a petition for an emergency bankruptcy, a debtor should be aware of the benefits and limitations involved in the process. Some benefits of filing for emergency bankruptcy may include the following:
- It can be used to stop certain collection acts from occurring against the debtor immediately, such as repossession of property, foreclosure of a home, and being sued by a creditor for debts owed (note that this does not mean that these acts will not happen eventually);
- In certain instances, it may give the debtor some time to reclaim possession of property while bankruptcy proceedings are currently underway; and/or
- Once filed, it will allow the debtor to receive the protections granted by an automatic stay.
On the other hand, some limitations of filing for emergency bankruptcy can include that:
- Not all debtors may qualify to file for emergency bankruptcy. For instance, debtors who have filed for bankruptcy in the past may be restricted from filing for emergency bankruptcy altogether or will have to abide by stricter limitations than they normally would if this had been their first time filing for it;
- A debtor must still complete the mandatory credit counseling sessions and receive a certificate of completion within 180 days before filing, even in emergency bankruptcy cases;
- After the bankruptcy hearing is over, a debtor may still have to pay off certain non-dischargeable debts (e.g., spousal support); and
- Despite the fact that it is an emergency filing, a debtor must comply with the majority of procedural requirements like providing any and all documents requested by the bankruptcy court. In other words, a debtor cannot simply request an emergency bankruptcy, reap the benefits of an automatic stay, and then abandon the case.
Do I Need to Hire a Lawyer for Help Filing for Emergency Bankruptcy?
Handling a bankruptcy matter without the assistance of a legal expert can be very stressful. These types of cases require strict attention to detail, thorough knowledge of the law, and proper compliance with necessary procedures. For many, bankruptcy cases can also be unsettling due to the subject matter involved, namely, your finances.
Therefore, if you need to file for emergency bankruptcy, it may be in your best interest to contact a local bankruptcy lawyer as soon as possible. An experienced financial lawyer will already be familiar with the relevant bankruptcy laws and legal processes, will be able to determine whether or not you are eligible to file for emergency bankruptcy, and can relieve some of the stress that filing for bankruptcy may cause.
In addition, your lawyer can assist you with any supplemental bankruptcy filings, inform you about the risks and benefits of filing for bankruptcy in general, and provide representation in court during your bankruptcy proceedings.