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Bankruptcy Basics: Federal Error Resolution Rights.

The Electronic Fund Transfers Act (EFTA) provides consumers error correction rights applicable to debit card transactions, direct deposits, automatic bill payment plans, and other forms of electronic transfers withdrawn directly out of a consumer’s bank account. 15 U.S.C. § 1693; 12 C.F.R. § 205. The consumer must send a notice within sixty days after receiving a bank statement displaying the error, identifying the consumer and the bank account, and indicating the nature of the error. While this notice can be made orally, the bank can require a confirming notice in writing.

Bankruptcy Basics: Applicability to Checks and Electronic Check Conversion.

In an odd twist, consumers have significant statutory error resolution rights when they pay by credit or debit card or by a direct electronic transfer, but only have such rights in special cases when they pay by check. When the consumer’s check is deposited by the payee, the consumer has no special statutory error resolution rights, except that the federal “Check 21” statute provides certain dispute rights when the problem is confined to the electronic imaging process for the consumer’s check and is not related to the original paper check.

Bankruptcy Basics: Closed-End Small Loans

Small loans may take collateral in personal items, such as lawnmowers, stereos, and musical instruments, 5nd these security interests trigger the Uniform Commercial Code (UCC) § 9-210 rights described under “Car Loans and Auto Title Pawns” above. Significantly, in the case of some small loans it may be unclear what collateral the creditor is presently claiming secures the loan. UCC § 9-210 allows the consumer to send a request reasonably identifying the consumer and the account number, and asking the creditor to approve or correct a list of collateral provided by the consumer.

Bankruptcy Basics: Coverage.

The federal Act applies to members of the uniformed services on active duty. Persons entitled to the law’s protections include:

Bankruptcy Basics: Active Duty.

Active duty includes full-time training, annual training duty, and attendance at a military school while in active military service. Active duty also includes periods of time that a member is absent from duty on account of sickness, wounds, leave, or other lawful cause. It does not include periods of time the member is absent without leave (AWOL), and may not include time the member is confined to military prison.

Bankruptcy Basics: Protections Against Foreclosure

The Servicemembers Civil Relief Act provides important protections for members of the military facing foreclosure while on active duty. The protections apply if the servicemember is obligated on mortgage, trust deed, or similar obligation (for example, a land installment contract) that originated before the servicemember began active duty.

Bankruptcy Basics: Interest Rate Reduction

The Act requires that creditors reduce the interest rate to six percent on any obligation entered into by a servicemember before active duty. The interest rate reduction applies to all types of debt, including mortgages, car loans, credit cards, and business debts. The rate reduction even applies to the interest paid on obligations under a confirmed chapter 13 bankruptcy plan. The interest rate reduction lasts for the period of active duty plus one year for mortgage debts, and for the period of military service for other debts.

Bankruptcy Basics: Vehicle and Other Repossessions; Automobile Leases

The Act prohibits creditors from repossessing property such as cars or furniture without a court order if the servicemember paid a deposit or made an installment payment on the contract before entering active duty.

The Act gives the servicemember the option of terminating a vehicle lease upon entering active duty in certain circumstances. This right applies to any vehicle used or leased for use by the servicemember or a spouse or dependent.

Bankruptcy Basics: Enforcement

The Act allows any person aggrieved by a violation to bring suit for equitable or declaratory relief and all other appropriate relief, including monetary damages. The court is authorized to award attorney fees if the aggrieved person prevails. Courts have also allowed servicemembers to pursue common law claims, such as conversion. The United States attorney general also has authority to enforce the Act.

Bankruptcy Basics: Required Documents in All Consumer Cases

Most of the required documents in a bankruptcy case are official forms promulgated by the Judicial Conference of the United States. Normally a bankruptcy case is started by filing all of the required documents at once, except those that must be filed postpetition. However, to accommodate emergency filings, Bankruptcy Rule 1007 allows a case to be initiated by filing less than the full set of documents. At a minimum, the documents required to start a case are as follows:

Bankruptcy Basics: Electronic Case Filing (ECF)

Almost every bankruptcy court requires that bankruptcy forms be filed electronically. Some courts provide an exception for attorneys who file only an occasional case. These courts permit such attorneys or pro se debtors to file in paper form or they provide scanning and other equipment at the clerk’s office that can be used to convert the forms to Adobe Acrobat (PDF) format for electronic filing. However, there are many advantages to electronic filing, and attorneys should consider becoming an ECF filer.

Bankruptcy Basics: Computer Programs

Attorneys who regularly handle bankruptcy cases typically purchase special software programs to produce the bankruptcy forms. These software programs facilitate the entry and organization of data on the forms, similar to a spreadsheet program, and assist in getting the documents in proper form for electronic filing. Some volunteer lawyer programs make such bankruptcy programs available to volunteer attorneys to use at a computer workstation in their office.

Bankruptcy Basics: PREPARING THE DOCUMENTS

The sample case below is provided to help illustrate how the basic forms are prepared. The debtor has decided to file for chapter 7 bankruptcy primarily to stop a wage garnishment. Her attorney has learned the following information from the initial client interview.

Bankruptcy Basics: Social Security Number

The form requires the reporting of only the last four digits of the debtor’s Social Security number or other taxpayer identification number.

As discussed below, debtors must also submit Official Form 121—Statement of Social Security Number(s) on which they must supply their full Social Security number, or indicate that they do not have a Social Security number.

Bankruptcy Basics: Business Names

The form has a space for listing any trade names or doing business as names, as well as Employer Identification Numbers (EIN) used by the debtor. Debtors should only complete this portion of the form if they have done business as a sole proprietorship. Debtors should not list any corporations or limited liability companies they own; instead they should be listed on the Statement of Financial Affairs, Official Form 107 (discussed below). If a debtor is a sole proprietor, Part 3 of the petition contains additional questions for the debtor to answer.

Bankruptcy Basics: Address

The form requires listing both a street address and any separate mailing address, as well as any separate addresses used by a joint debtor. Married debtors living together can state “same” in the joint address box.

Bankruptcy Basics: Venue

The next section of the petition asks why the debtor is choosing this district to file for bankruptcy. In most consumer cases, the debtor will check the box in the venue section of the petition stating that they have been domiciled or had a residence in the judicial district in which the case is filed for the 180-day period preceding the petition date (or in that district for a longer part of the 180-day period than in any other district).

Bankruptcy Basics: Paying the Fee.

The petition must be accompanied by filing fees totaling $338 in chapter 7 cases and $313 in chapter 13 cases, unless the debtor files an application for waiver of the chapter 7 filing fee, or an application and order to pay the filing fee in installments. Married debtors need only pay a single filing fee if they file jointly. The debtor should check the appropriate box indicating whether the filing fee is being paid in full, in installments, or whether the debtor is seeking waiver of the fee. In the sample case, Ms. Reyes is seeking waiver of the fee.

Bankruptcy Basics: Installments.

Official Form 103A is an application and order to pay the filing fee in installments. If the debtor is unable to pay the full filing fee at the outset of the case, Bankruptcy Rule 1006(b) provides that the fee may be paid in installments. No filing fee need be paid at the time the petition is filed if the petition is accompanied by this form, though typically the first installment is paid with the petition. No more than four installments may be proposed, to be paid over no more than 120 days after the petition is filed. The court, for cause, can extend the period to 180 days.

Bankruptcy Basics: Property That Requires Attention.

Part 4 of the petition requires the debtor to disclose whether the debtor owns or has possession of property that poses or is alleged to pose a threat of imminent and identifiable harm to public health and safety, or requires immediate attention. The form provides examples of perishable goods, livestock requiring food, or a building needing urgent repairs. Tenants ordinarily do not need to report condition problems on this portion of the petition, but should instead list claims against their landlord as assets on Schedule A/B.

Bankruptcy Basics: Signature of Debtor.

After the petition has been prepared, reviewed by the debtor, and any final corrections made, the debtor must sign the petition. Part 7 of the petition contains signature lines for the debtor and the debtor’s attorney. The debtor should be advised that they are declaring under penalty of perjury that the information provided in the petition is “true and correct,” and that if the debtor has chosen to file under chapter 7, the debtor is aware of the right to proceed under other chapters.

Bankruptcy Basics: Signature of Attorney.

An attorney representing a debtor must sign the petition in the box below the debtor’s signature. The signature constitutes a declaration that the debtor’s attorney has informed the debtor that they may proceed under chapter 7, 11, 12, or 13 of the Bankruptcy Code, as applicable, and has explained the relief available under each chapter. The signature is also a certification that in a case filed by an individual with primarily consumer debts, the attorney has no knowledge after an inquiry that the information in the schedules filed with the petition is incorrect.