Bankruptcy is a type of legal process in which a person or entity can seek relief from, restructure, and/or reduce certain kinds of debt. Under the federal law known as the U.S. Bankruptcy Code, there are several different chapters of bankruptcy that a person or entity may file for. These include Chapter 7, Chapter 13, and Chapter 11.
After a debtor determines what chapter of bankruptcy to file for, they will gather the necessary financial documents and fill out the appropriate legal forms (e.g., bankruptcy petition). They will also obtain a certificate that proves they completed a mandatory credit counseling course, and then file all of the above paperwork with their local federal bankruptcy court.
If you need to file for bankruptcy, but are unsure of which chapter of bankruptcy to select and/or where to submit your paperwork, you should speak to a local bankruptcy attorney for further information.
An attorney can make sure that you meet the qualifications to file for bankruptcy, help you prepare all of your bankruptcy documents, and answer any questions you may have about bankruptcy in general. Your attorney will also be able to provide representation in court if necessary.
Where Should I File If My Place of Residence Is Different from My Business?
All bankruptcy petitions must be filed in a local federal bankruptcy court. This exact location will vary based on jurisdiction, state laws, and local regulations. In general, most rules provide that a debtor file their bankruptcy petition with a court that is situated in either a jurisdiction where they have lived or operated a business within the last 180 days (i.e., six months).
Specifically, the 180-day rule states that the debtor should file where their principal place of business is, where their primary residence is, or where the majority of the debtor’s assets are held. Thus, if the debtor is filing for bankruptcy to obtain relief from business debt, then it would make the most sense for them to file in the jurisdiction where their business is located.
On the other hand, if the debtor is seeking relief from personal debts, then they will file in a bankruptcy court that is closer to their primary residence. If creditors are expected to receive a large sum in a bankruptcy case that stems from a particular asset (i.e., an expensive vacation home), then the case may be filed in the jurisdiction where that large asset is located.
Lastly, if the debtor or their business does not meet the 180-day requirement, then the debtor should file in the place where they spent the majority of the past 180 days.
Will I Have to Go To Court to File Bankruptcy?
The bankruptcy process does not require many sessions in court. In fact, if no complicated issues exist, then a debtor should only have to attend court approximately three times. Once to submit their bankruptcy petition and various financial documents, a second time to appear at the mandatory 341 Meeting of the Creditors session, and finally, at their bankruptcy hearing where a judge will decide whether to grant or deny their request to declare bankruptcy.
In general, the bankruptcy process typically requires the following court appearances:
- Shortly after the debtor files for bankruptcy at their local federal bankruptcy court, the clerk of the bankruptcy court will schedule a court date (usually around 30 to 35 days later) for when the obligatory 341 Meeting of the Creditors will be held.
- While the debtor is required to attend this meeting at the courthouse, it normally takes place in a conference room, as opposed to in a courtroom or in front of a judge. During this meeting, the debtor will speak with the Trustee assigned to their bankruptcy case. Creditors are also invited to attend, but usually they do not. This meeting should last no longer than 5 to 10 minutes.
- If all goes well at the 341 Meeting and there are no other issues, the Trustee will approve the discharge, which the debtor should receive about 45 to 75 days later. In this scenario, the debtor will not need to appear in court a third time. Most Chapter 7 Bankruptcy cases are handled accordingly.
- A third court appearance in front of a judge may be required, however, if there is an issue with a Chapter 7 Bankruptcy case (e.g., a creditor objects), if the judge needs to confirm the repayment plan in a Chapter 13 Bankruptcy case, if state law mandates as much, and/or if any other legal problems arise that must be resolved by a court.
What Types of Papers Do I Need to Prepare for a Bankruptcy Filing?
The bankruptcy process will involve an examination of all the debtor’s property and assets. Depending on the chapter of bankruptcy for which the debtor is filing, there are numerous requirements to comply with and various documents that must be submitted to the court.
In general, some documents needed when filing for bankruptcy include the following:
- Bank account statements, credit card statements, and other relevant financial documents;
- Loan documents (e.g., home mortgage contracts);
- Business records, bookkeeping logs, and any other financial statements associated with a business (if applicable); and
- Various other paperwork that affects a debtor’s financial standing, such as divorce records, tax documents, outstanding liens, and so forth.
What Happens After the Paperwork is Submitted?
Once the debtor completes and submits their paperwork to the proper federal bankruptcy court, the judge will issue an automatic stay. The automatic stay prevents creditors from harassing the debtor for payments or from seizing their property to satisfy their debts.
The clerk of the bankruptcy court will then schedule a date for when the 341 Meeting of the Creditors will be held (usually within 30 to 35 days). The debtor is obligated to attend this meeting since this is where they will meet with the bankruptcy trustee appointed to handle their case and any creditors. It should be noted, however, that creditors are not required to attend these meetings and thus typically do not appear at them.
So long as there are no other problems, the meeting should last approximately 5 to 10 minutes. The Trustee will then issue a discharge in about 45 to 75 days. If there are issues or a specific bankruptcy chapter requires a confirmation hearing, then the debtor may need to attend a confirmation hearing where a judge will issue a ruling whether or not to grant the debtor’s request for relief.
What Are Some other Considerations When Filing Bankruptcy?
Some other items that debtors should take into consideration when filing for bankruptcy include:
- Knowing the proper chapter of bankruptcy to file for and ensuring that they are eligible to file for it;
- Making sure that they are not over the limit for the number of times they can file for bankruptcy within a certain period;
- Understanding the obligations they have under the particular chapter of bankruptcy that they filed for (such as which debts will need to be paid and which nonexempt assets will need to be surrendered in order to do so); and
- Being aware of updates or changes made to federal, state, and local bankruptcy laws, which may affect their case, debt obligations, and legal rights.
What Happens If I File My Bankruptcy Petition in the Wrong Court?
In most instances, a federal bankruptcy court will accept a bankruptcy petition no matter where the debtor files it. If no parties to the case object to jurisdiction, then the case will proceed as usual. However, if a party objects, then the case may be dismissed or moved to another court.
For example, if the debtor files in the wrong bankruptcy court, then the bankruptcy Trustee that is assigned to their case or one of their creditors may make a motion to have the case dismissed or to have their case moved to a different bankruptcy court.
Again, if no parties object, then the case may continue on as if the debtor had filed in the appropriate federal bankruptcy court. If the debtor catches their mistake before a party makes a motion to dismiss or transfer the case, then they may amend their bankruptcy filing. This may require paying additional filing fees and serving amended copies on the interested parties.
If the case is dismissed, however, then the debtor will need to refile it in the proper federal bankruptcy court, pay the additional filing fees, and re-serve copies of the court documents on the interested parties.
A dismissal can also result in a removal of the automatic stay. An automatic stay is what prevents creditors from collecting or demanding payments for debts. Thus, if the debtor does not re-file or until the debtor refiles, the creditors can continue requesting and collecting payments. This may result in the creditors seizing certain items of the debtor’s property, which could have been avoided had the debtor filed in the proper court in the first place.
If a creditor or the Trustee makes a motion to transfer the case and the court approves it, then the debtor will need to appear and/or submit any necessary documents to the new bankruptcy court in which the case was transferred. Depending on the case, this may or may not affect the length of the automatic stay.
Finally, if the debtor filed their bankruptcy case in the wrong venue due to fraud or in bad faith, then the court may dismiss their case with prejudice, lift the automatic stay, and permit creditors to seize the debtor’s nonexempt assets to satisfy their debts.
Do I Need a Lawyer for Assistance with Bankruptcy?
Filing for bankruptcy can be an extremely stressful and emotionally taxing life event. Not only does it involve a thorough and somewhat invasive examination of a debtor’s finances and assets, but it also requires conforming to a strict legal process, meticulous attention to detail in doing so, and a strong grasp of both federal and state bankruptcy regulations.
Therefore, if you have any questions or need assistance in filing for bankruptcy, you should consult a local bankruptcy attorney as soon as possible. An experienced bankruptcy attorney can answer any questions you may have, explain the pros and cons of filing for bankruptcy, and can help you choose the right chapter of bankruptcy when it comes time to file.
In addition, your lawyer can provide guidance on the applicable bankruptcy laws, can determine which items of property may be exempt from the process, and will be able to direct you to the appropriate court. Your lawyer can also walk you through the process, assist you in reviewing and calculating your assets, and can provide representation in court if necessary.