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Bankruptcy Basics: One Prior Dismissed Case.

If the consumer has had a prior bankruptcy case dismissed within the year before the petition is filed, the automatic stay will terminate thirty days after the case is filed. 11 U.S.C. § 362(c)(3). However the debtor may request that the court extend the stay as to some or all creditors. 11 U.S.C. § 362(c)(3)(B). The debtor must demonstrate that the case has been filed in good faith, often by showing that circumstances have changed.

Bankruptcy Basics: Two Prior Dismissed Cases.

If a debtor has had two or more prior bankruptcy cases dismissed within the year before filing the new petition, the automatic stay does not go into effect upon the filing of the case. 11 U.S.C. § 362(c)(4). On a motion filed by the debtor within thirty days after the filing of the later case the court may order the stay to take effect as to some or all creditors upon a showing by the debtor that the case has been filed in good faith.

Bankruptcy Basics: Codebtor Stay Still Available.

The codebtor stay provided by section 1301 is not affected by the repeat filing limitations. The stay limitations under subsections 362(c)(3) or (c)(4) do not prevent the application of the codebtor stay to any actions taken against a codebtor on a consumer debt of the debtor.

Bankruptcy Basics: Court Order in Prior Case.

The automatic stay is not applicable as to the enforcement of a security interest in real property if the debtor files a case during a period when the debtor is ineligible to be a debtor under section 109(g) or in violation of a prior court order prohibiting the debtor from being a debtor in another case. 11 U.S.C. § 362(b)(21).

Bankruptcy Basics: Burden of Proof.

Section 362(g) has generally been interpreted to require that the creditor seeking relief from the stay has the burden to establish the validity and perfection of its security interest, the amount of the debt and other allowable costs included in its claim, and the amount of the debtor’s equity in the property. While the debtor has the burden of proof with regard to the remaining issues, the question of adequate protection is often determined based on the debtor’s equity in the property, which the creditor is usually required to prove is lacking.

Bankruptcy Basics: Introduction

Bankruptcy is a right provided by law to people who are deeply in debt and in need of a fresh start. Bankruptcy will discharge many of your debts and you will not have to pay them, except that mortgages and other liens may still need to be paid if you want to keep the secured property.

The law allows you to keep some money and most types of necessary property in bankruptcy. To receive this protection, it is necessary that you list all items asked for in the following questions. If you do not list an item, that item will not be protected and may be sold in your bankruptcy case.

Bankruptcy Basics: Why Take Pro Bono Cases

In 2017 the American Bankruptcy Institute (ABI) established a Commission on Consumer Bankruptcy for the purpose of researching and recommending improvements to the consumer bankruptcy process, ranging from policy suggestions to proposed statutory amendments. The Commission was particularly focused on studying how the 2005 BAPCPA amendments affected the availability of bankruptcy relief to consumers. The Commission released its report in 2019.

Bankruptcy Basics: How to Volunteer

If you are interested in handling a pro bono bankruptcy case and are looking for information about local programs, check with the local bar association or legal services provider. You can find a Legal Services Corp. (LSC)-funded legal aid organization near you by using the locator on the LSC website: https://www.lsc.gov.

Bankruptcy Basics: Debtor Attorney Duties Under Bankruptcy Rule 9011

Bankruptcy Rule 9011, which is modeled after Rule 11 of the Federal Rules of Civil Procedure, governs attorney conduct by setting forth requirements for the signing of papers and representations made to the bankruptcy court. Most documents filed or submitted in a bankruptcy case are subject to Bankruptcy Rule 9011 and must be signed by at least one attorney of record.

Bankruptcy Basics: In General

The law also provides other dispute rights, although these legal rights vary dramatically depending on the nature of the transaction, and some are of more practical use than others. Exercising rights to dispute debts and charges may result in the elimination of certain debts, allowing the debtor to commit more of the household monthly income to necessary expenses.

Bankruptcy Basics: Right to Cancel

Reaffirmation agreements may be canceled at any time before the entry of the discharge order, or until sixty days after the agreement is filed with the court, whichever occurs later. 11 U.S.C. § 524(c)(4). No reason is required for canceling a reaffirmation agreement, but written notice of the cancellation must be given to the creditor.

Bankruptcy Basics: Judicial Liens.

Section 522(f)(1)(A) gives the debtor the right to avoid any judicial lien that impairs an exemption, except a lien securing a domestic support obligation (as defined in section 101(14A)). The term judicial lien is defined broadly, and includes levies, judgment liens, and liens obtained in any legal or equitable proceeding. 11 U.S.C. § 101(36). The right to avoid judicial liens extends to every type of exempt property, without limitation, including property exempted under wild card provisions.

Bankruptcy Basics: Liquidating Chapter 13 Plans

For some clients a chapter 13 plan may not be feasible because their income is insufficient to fund a plan, or they have excessive unsecured debt that must be paid due to application of the “best interest of creditors” test. See Chapter 4, supra. Even in this situation a client may elect to file bankruptcy so as to gain the protection of the automatic stay while attempting to liquidate the property.

Bankruptcy Basics: Overview.

Several provisions of the Bankruptcy Code impose additional responsibilities on attorneys representing debtors in consumer bankruptcy cases. One such set of provisions is found in section 707(b)(4)(A) through (D). These provisions, discussed below, require additional attorney duties and certifications which are only applicable in chapter 7 cases. See 11 U.S.C. § 103(b).

Bankruptcy Basics: Costs and Attorney Fees for Successful Abuse Motions—Section 707(b)(4)(A).

As noted above, under section 707(b)(4)(A), costs and attorney fees incurred in prosecuting a successful section 707(b) motion to dismiss the case as an abusive filing may be assessed against the debtor’s attorney if the attorney violates Bankruptcy Rule 9011 in filing the bankruptcy case itself. This provision mirrors the duties already imposed on attorneys under Bankruptcy Rule 9011, but provides the court with more flexibility to award monetary sanctions against an offending attorney.

Bankruptcy Basics: Introduction

In order to provide the information necessary to make the determinations concerning the presumption of abuse in chapter 7 and concerning disposable income in chapter 13, the debtor must file the appropriate version of Official Form 122. Bankruptcy Rule 1007(b)(4). These forms, though lengthy and complicated, are largely self-explanatory. Fortunately for pro bono and other attorneys representing debtors whose income falls below the state median income, only one of the forms must be completed.

Bankruptcy Basics: Civil Penalties Under Bankruptcy Rule 9011—Section 707(b)(4)(B).

Similarly, under section 707(b)(4)(B), a court may assess a civil penalty against a debtor’s attorney who violates Bankruptcy Rule 9011, and such penalty may be payable to the trustee, the United States trustee, or the bankruptcy administrator. Like the fee-shifting provision of 707(b)(4)(A), this penalty may be assessed in favor of the trustee, the United States Trustee, or the bankruptcy administrator even if the penalty is assessed on the court’s own initiative (or on the motion of another party).

Bankruptcy Basics: Overview

Sections 526 through 528 regulate the activities of “debt relief agencies,” which are defined below. While not all attorneys are debt relief agencies and not all debt relief agencies are attorneys, an attorney practicing bankruptcy law should be knowledgeable of all the statutory duties, restrictions, and requirements governing debt relief agencies.

Bankruptcy Basics: Applicability of Debt Relief Agency Provisions to Debtor’s Attorney

A “debt relief agency” is defined as any person who provides bankruptcy assistance to an assisted person in return for compensation or who is a bankruptcy petition preparer as defined in section 110. 11 U.S.C. § 101(12A). The statutory language is certainly broad enough to apply to attorneys. In fact it is so expansive as to potentially include attorneys who represent individual landlords, small businesses, and nondebtor spouses as creditors in bankruptcy cases, if they are “assisted persons” within the definition provided in section 101(3).

Bankruptcy Basics: Restrictions on Debt Relief Agencies

Several provisions found in section 526 restrict practices that generally had been considered improper even prior to the enactment of BAPCPA. For example, subsections 526(a)(1) and (2) prohibit debt relief agencies from failing to perform services as promised, from making or advising a client to make untrue or misleading statements, or advising clients to make statements that an agency should know are misleading. Section 526(a)(3) also prohibits debt relief agencies from misrepresenting the services to be provided to an assisted person or the benefits and risks of bankruptcy.