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Bankruptcy Basics: Overview

There are basically two types of creditors: secured and unsecured. Secured creditors, in general, are those that have an interest in the debtor’s house, car, or other property evidenced by a security agreement, statutory lien, or judicial lien. Unsecured creditors do not. Secured creditors are treated more favorably under the Bankruptcy Code than unsecured creditors. However bankruptcy does allow debtors flexibility in dealing with secured debt. Most secured debt can be altered in some way during the bankruptcy with very significant benefits for the debtor.

Bankruptcy Basics: In General

When the debtor wants to retain the property, but neither the redemption nor the “keep and pay” option is available, reaffirmation may be the best choice. By entering into a reaffirmation agreement with a particular creditor during bankruptcy, the debtor agrees to remain legally obligated on some or all of a debt that would otherwise be discharged. To reaffirm a debt, a reaffirmation agreement that complies with the Bankruptcy Code must be filed with the court.

Bankruptcy Basics: Reaffirmation Agreements

Reaffirmation agreements must meet the specific requirements of section 524 to be enforceable. The reaffirmation agreement may change the terms of the original contract and must be made and filed with the court before the discharge is entered in the debtor’s bankruptcy case. The debtor must receive extensive specific disclosures before or at the time the debtor signs the reaffirmation agreement. 11 U.S.C. § 524(k).

Consumer Bankruptcy Law and Practice: 11.4.1 Overview

Section 521(a)(2) requires the debtor in a chapter 7 case to file a statement of certain intentions with respect to property securing debts and with respect to personal property leases. Debtors need not state all of their plans on this statement. All that is required is a statement of whether the debtor intends to retain or surrender the collateral, whether it is claimed as exempt, and whether the debtor intends to reaffirm the debt.

Bankruptcy Basics: Secured Debts Without Reaffirmation

After bankruptcy secured debts may in some situations continue to be serviced in the ordinary course of business even though there has been no reaffirmation, redemption, or surrender. Most commonly this situation occurs when the debtor elects to keep the collateral and pay on the debt without reaffirming. For debts secured by the debtor’s principal residence, section 524(j) expressly permits this option by creating a limited exception to the discharge injunction.

Consumer Bankruptcy Law and Practice: 11.5.1 Purpose

One of the new provisions in the Bankruptcy Code when it was enacted in 1978 was section 722, which provides for a limited right of redemption in chapter 7 cases. In essence, it provides that for certain secured consumer debts the security interest may be eliminated upon payment to the creditor of the value of its collateral, that is, the amount of its allowed secured claim. In a case converted from chapter 13, the amount necessary to redeem is likely to be computed anew and without regard to a prior valuation in chapter 13.203

Bankruptcy Basics: § 830.50 Required Redaction of Debtor Tax Information

(a) The following redaction requirements apply to all tax information provided in accordance with section 521 of the Bankruptcy Code.

(b) Debtors providing tax information under 11 U.S.C. § 521 should redact personal information according to the criteria set forth in Fed. R. Bankr. P. 9037. A debtor should therefore redact personal identifiers in any tax information required to be filed with the court or provided to the trustee or creditor(s), in either electronic or paper form, as follows:

Bankruptcy Basics: E.5 Electronic Public Access Fee Schedule

The following fee schedule for use of the PACER system was issued by the Judicial Conference of the United States in accordance with 28 U.S.C. §§ 1913, 1914, 1926, 1930, and 1932. It is effective as of January 1, 2020.

Electronic Public Access Fee Schedule

The fees included in the Electronic Public Access Fee Schedule are to be charged for providing electronic public access to court records.

Published on: December 31, 2019

Effective on: January 1, 2020

Bankruptcy Basics: Aid 2 Median Income by State

Debtors with incomes below their state’s median family income will not be subjected to the “means test” formula to determine whether a debtor is presumed ineligible for a chapter 7 discharge. The debtor’s current monthly income restated on an annualized basis is compared with United States Census Bureau figures for the state’s median family income for that household size.

Bankruptcy Basics: Investigating the Facts

The debtor client is, of necessity, the primary source of information in a consumer bankruptcy case, and the client’s statement of the facts, obtained in a thorough and probing interview, should be presumed to be true absent particular circumstances that give rise to a suspicion that it is not. The debtor’s attorney should also obtain all documents reasonably available that are necessary to complete the petition, statement and schedules as fully and accurately as is reasonably possible.

Bankruptcy Basics: Introduction

This appendix contains three client handouts. The National Consumer Law Center provides copyright permission for individuals and organizations to copy or adapt these handouts for distribution without charge to consumers. No permission is granted to include these materials in other publications for sale.

Home Foreclosures: 10.1 Introduction

This chapter focuses on the issues that arise after the home is sold at foreclosure. After a completed sale, a consumer may seek to redeem the property or otherwise challenge the validity of a sale, or any deficiency judgment that arises. State law and procedure outline the consumer’s right to bring such actions, as well as to claim surplus proceeds from the sale, or damages for wrongful foreclosure. Federal bankruptcy law provides further protections for debtors seeking to set aside a sale in bankruptcy.

Home Foreclosures: 10.2.1 Purchasing the Home at the Foreclosure Sale

In every state, the consumer can redeem the home prior to the sale by paying the full amount due including various fees and expenses.1 In addition, like anyone else, a homeowner can bid on and buy the property at a foreclosure sale. The sale price may be less than the pre-sale redemption amount.

Home Foreclosures: 10.3.4.5 Sales That Are Not Complete Under State Law

If the debtor retains legal title to the property under state law until an event that occurs after sale such as delivery of the deed or confirmation of the sale, and the debtor files bankruptcy during that period and prior to the necessary event, then the debtor’s retained ownership interest comes into the bankruptcy estate. This principle is important because if an auction has been held, but the sale process is not considered complete under state law, a bankruptcy debtor may retain an ownership interest and the right to cure the default under 11 U.S.C.

Home Foreclosures: 10.2.2.1 State Statutes Described

Approximately half the states have foreclosure statutes that provide homeowners with a postforeclosure sale redemption period—a fixed period of time in which to set the foreclosure sale aside and regain title to the home by paying the foreclosure sale price, interest, and costs of the sale.5 Some states have more than one redemption law.

Home Foreclosures: 10.2.2.2 Utility of the Right to Redeem

In general, to successfully exercise the right of a post-sale redemption, the consumer should seek to comply strictly with statutory requirements.24 In judicial foreclosures, a court order will typically specify the redemption amount and the deadline for payment.

Home Foreclosures: 10.3.1 Overview

Often a homeowner does not seek legal advice until after a foreclosure has been completed. In some cases, the homeowner does not even become aware of the foreclosure until the property has been sold and the new owner brings an eviction action. This subsection summarizes the procedure for setting aside a completed foreclosure and some of the possible grounds for such an action.

Home Foreclosures: 10.3.2.2 Rooker-Feldman Doctrine

If, following completion of a judicial foreclosure process, the homeowner intends to raise objections concerning the underlying debt, such as TILA or other consumer defenses, the sale must be set aside and the foreclosure judgment must be reopened in the court that entered it. Otherwise, defenses to the debt may be precluded by res judicata or under the Rooker-Feldman doctrine.

Home Foreclosures: 10.9 Former Owners in Possession of Property Following Foreclosure

Unless the sale is set aside, the right of a former homeowner to possess the property terminates with the foreclosure sale,716 ratification,717 or at the expiration of the redemption period.718 Procedures will vary depending on whether it was a judicial or non-judicial foreclosure. Often the purchaser at the foreclosure sale (who will often be the lender) will bring an eviction action against the former homeowner and obtain a judgment.

Home Foreclosures: 10.3.3.1 Generally

In order to recover the property after a foreclosure, a homeowner must be able to assert a legal basis to invalidate the foreclosure sale after a power of sale foreclosure, or to set aside the judgment and sale after a judicial foreclosure.