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Bankruptcy Basics: Part 1

Part 1 includes three questions about the debtor’s background. Question 1 asks for the debtor’s marital status. Question 2 requires the debtor to provide all prior addresses where the debtor resided within the previous three years. The debtor does not need to list their current residence. The answer to this question may help the trustee or other parties verify the identity of the debtor and determine whether the debtor’s claim of exemptions is proper under the domiciliary requirements of section 522(b)(3)(A). Ms. Reyes has listed her former residence.

Bankruptcy Basics: Part 3

Part 3 contains questions about prepetition payments or transfers of property by the debtor, particularly as they relate to the trustee’s avoidance powers under sections 547 and 548. Question 6 asks whether either debtor’s debts are primarily consumer debts. If so, the next question requests information from these consumer debtors about loans and other debts on which more than $600 was repaid within the ninety days prior to the bankruptcy.

Bankruptcy Basics: Part 4

Part 4 contains questions about legal proceedings involving the debtor or the debtor’s property. Question 9 asks the debtor to provide information about all lawsuits and administrative proceedings involving the debtor that are pending or were terminated within the previous year. When such pending proceedings involve claims brought by the debtor they should also be included on Schedule A/B as property of the debtor and on Schedule C as exempt, if possible.

Bankruptcy Basics: STATEMENT OF INTENTION

Another required document in chapter 7 cases (but not in chapter 13 cases) is the statement of intention (Official Form 108) regarding property securing debts and leased personal property. 11 U.S.C. § 521(a)(2)(A); Bankruptcy Rule 1007(b)(2). This document must state certain intentions of the debtor, as of the date of its filing, with regard to any property, real or personal, that serves as collateral for a debt. In addition, this form requires the debtor to state the debtor’s intentions with respect to leases of personal property.

Bankruptcy Basics: Part 1

Part 1 of Form 122A-1 is the calculation of monthly income for the purposes of section 707(b)(7), which creates a safe harbor from the means test for lower income debtors.

Bankruptcy Basics: Form 122A-2 and Form 122C-2

Those debtors who must complete Form 122A-2 or Form 122C-2 must consult the Internal Revenue Service living expense standards to answer the first few questions of Form 122A-2 and Form 122C-2.

Consumer Bankruptcy Law and Practice: 9.3.3.1 Generally

Generally, if a case is dismissed, and a new filing is appropriate, a new automatic stay comes into effect.17 However, counsel should take care that the subsequent filing is in good faith and not barred by the 180 day limit of 11 U.S.C. § 109(g).18 If relief from the stay is granted or the stay is terminated during a case, conversion of the case to another chapter does not create a new stay.19

Consumer Bankruptcy Law and Practice: 9.4.6.6.1 Introduction

The 2005 Act created two new limitations on the automatic stay in landlord-tenant matters. These are likely to cause hardship to some tenants seeking to avoid homelessness by curing rent arrearages through chapter 13 bankruptcy. They are also likely to cause confusion among landlords and lead to violations of the automatic stay.244

Bankruptcy Basics: Automatic Stay

The automatic stay is a fundamental cornerstone of the bankruptcy system established under the Bankruptcy Code. It is triggered instantly upon the filing of a bankruptcy petition. 11 U.S.C. § 362(a). With few exceptions the automatic stay stops creditors from taking collection action, pursuing or continuing a court case against the debtor, or seizing any property of the debtor based on debts that arose before the bankruptcy petition is filed. The stay covers, for example, repossessions, attachments, foreclosures, utility shut-offs, property tax sales, and evictions.

Bankruptcy Basics: Exempting Tax Refunds

Income tax refunds, including child tax credit and earned income tax credit (EITC) payments, can be significant and needed assets for many lower-income debtors. To the extent that tax refunds become property of the estate based on the timing of when the bankruptcy is filed, the debtor will want to claim some or all of the tax refunds as exempt. In non-opt out states, this is typically done by claiming the wildcard exemption under section 522(d)(5), which can exempt up to $15,425 in tax refunds depending upon how much of the unused homestead exemption is applied.

Bankruptcy Basics: Protection of Exempt Property from Lien Creditors

A chapter 7 or chapter 13 bankruptcy may protect the debtor’s exempt property from collection actions of a judgment creditor by providing for the avoidance of judgment liens under section 522(f), to the extent such liens impair the debtor’s exemptions. This provision also permits the avoidance of certain nonpossessory, nonpurchase-money security interests in exempt personal property. Moreover, a debtor may avoid certain prepetition involuntary transfers of property that the debtor could have exempted.

Bankruptcy Basics: Overview.

An individual whose debts are primarily consumer debts may face dismissal of their bankruptcy case if it is deemed to be an “abuse” of the bankruptcy system. This abuse may be established in one of two ways: First, and less commonly, if the movant can show the debtor is using bankruptcy for an improper purpose, such as stalling for time with no intent of obtaining a discharge or if the debtor clearly has the ability to pay all or most of the debts.

Bankruptcy Basics: Median Family Income.

The next step is to obtain the applicable median family income. These figures for each state and household size can be found on the United States Trustee Program’s website at https://www.justice.gov/ust. The specific income figure used will be for the debtor’s household size. As the Bankruptcy Code does not define household, some courts apply the Census Bureau definition, which generally includes all people who occupy a housing unit regardless of relationship.

Bankruptcy Basics: Application of the Means Test.

Once the allowed expenses are determined and totaled, this amount is subtracted from the debtor’s current monthly income and then multiplied by sixty. The debtor “flunks” the means test, meaning that a presumption of abuse exists, if this amount exceeds the lesser of: (1) $9,075 or 25% of nonpriority unsecured debt, whichever is greater, or (2) $15,150. Put another way, a debtor may file a chapter 7 case without a presumption of abuse arising if their monthly income after expenses is less than $151.25 per month ($9,075 ÷ 60).

Bankruptcy Basics: When Advisable.

A reaffirmation is an agreement entered into during bankruptcy by the debtor with a particular creditor in which the debtor agrees to remain legally obligated on some or all of a debt that would otherwise be discharged. Such agreements must meet specific requirements provided in section 524 to be enforceable.

Bankruptcy Basics: Overview.

The discharge in chapter 7 covers all debts owed by the debtor except those that are specifically excluded under section 523(a). The exceptions to discharge of particular debts listed in section 523(a) are narrowly drawn and construed by the courts.

Bankruptcy Basics: Debts Excepted from Discharge by Operation of Law.

Some debts are nondischargeable simply based on the fact that they are of the type specified in section 523(a). If the creditor contends that the debt is covered by one of these exceptions to discharge, the creditor is not required to bring an action in the bankruptcy court to have the debt declared nondischargeable and may take action against the debtor once the automatic stay is lifted or the bankruptcy case is closed.

Bankruptcy Basics: Request for a Mortgage Payoff Statement.

A request for a mortgage payoff statement can be an effective tool for discovering whether a servicer has imposed improper fees and charges on the borrower’s mortgage account. Many states have enacted laws that require a prompt response to a borrower’s request for a mortgage payoff statement. In addition to setting a deadline for a response, these laws often specify the maximum fee a servicer may charge for responding to the request.

Bankruptcy Basics: Debt Collection Claims

When a third party is collecting on a debt, the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692h, and its implementing Regulation F, 12 C.F.R. § 1006.34, require debt collectors to provide “validation information” about the alleged debt and a consumer’s rights to dispute it. The validation information includes a great deal of detail about the debt. Debt collectors can provide this information orally, electronically, or via a written letter at or shortly after their first contact with a consumer.

Bankruptcy Basics: Overview

The Servicemembers Civil Relief Act, 50 U.S.C. §§ 3901–4043, provides special protections for military service personnel on active duty and their dependents, for debts incurred before the military service personnel went on active duty. The military is responsible for providing information to military personnel on the benefits available under the law. Among the most significant protections are:

Bankruptcy Basics: Court Documents.

Debtors should be asked to provide documents relating to any litigation in which they are involved. In actions brought against the debtor, a review of the documents may reveal other parties to be potential creditors or counterclaims to be potential property interests of the debtor. These documents may also indicate whether any postjudgment collection action is imminent or whether judicial liens may exist on the debtor’s home. In actions brought by the debtor, potential claims can be identified so that they may be properly listed and possibly exempted on the debtor’s bankruptcy schedules.