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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.

Bankruptcy Basics: STATEMENT OF SOCIAL SECURITY NUMBER

Debtors must submit a statement of Social Security number(s) (Official Form 121) on which they must supply their full Social Security number, or indicate that they do not have a Social Security number. Bankruptcy Rule 1007(f). If a joint case is filed, both debtors must fill out the form. The statement is submitted with the petition and schedules but is not made part of the official court file. The form ensures that the debtor’s full Social Security number is not available to the general public or over the internet.

Bankruptcy Basics: MAILING LIST

Bankruptcy Rule 1007(a)(1) requires that the debtor file with the petition a list of the names and addresses of all creditors included on Schedules D and E/F, and any entity included on Schedules G and H. The debtor may also wish to include on the mailing list the names and addresses of related parties or representatives not listed on the schedules, such as a creditor’s attorney. The mailing list (sometimes referred to as the “mailing matrix”) is not prepared on an official form and is used by the court system to prepare notices for interested parties.

Bankruptcy Basics: SCHEDULES

All debtors who file a bankruptcy case, under any chapter, must submit Schedules A/B through J (Official Form 6). These schedules are intended to comply with section 521(a)(1) of the Bankruptcy Code and Bankruptcy Rule 1007(b). The main purpose of these schedules is to give an exact picture of the debtor’s assets, liabilities, budget, and financial affairs as of the petition date, in a uniform manner that facilitates administration of the case. The following sections describe generally how these schedules are to be completed, but local rules may impose additional requirements.

Bankruptcy Basics: Security Deposits

Security deposits are generally any deposit given to a creditor to ensure future payment. The most common types of deposits are those given to landlords and utility companies. Deposits made with landlords may include last month’s rent, cleaning deposits, key deposits, pet deposits, and so forth. In most states debtors continue to have a property interest in security deposits. In many cases security deposits are overlooked assets of the debtor that should be properly listed and exempted on Schedule C if possible.

Bankruptcy Basics: Household Goods and Furnishings

Courts vary widely in the specificity they require in the descriptions of household goods. In general, a brief description of the types of items is sufficient, rather than an itemized description of each item of property. However, the debtor should list separately each major appliance and anything of exceptional value. Some courts will allow all items of small value in a room to be called a “set.” If there is a long list of household goods, it may be typed separately, included as an appendix to the schedules, and incorporated here by reference.

Bankruptcy Basics: IRA, ERISA, and Other Pension Plans

Although ERISA-qualified pension plans are not property of the estate under section 541(c)(2) and Patterson v. Shumate, 504 U.S. 753 (1992), they are nevertheless personal property of the debtor which must be listed on Schedule A/B in line 21. If the pension plan is ERISA-qualified, the debtor should indicate that it is not part of the bankruptcy estate. The debtor may be asked to provide proof to the trustee that the plan is ERISA-qualified.

Bankruptcy Basics: Tax Refunds

Tax refunds due the debtor should be listed here and exempted, if possible. In many districts anticipated refunds for prior tax years are listed as a prorated amount to reflect the period from the beginning of the applicable tax year to the date the petition is filed. Ms. Reyes has listed the prorated amount of anticipated tax refunds, including the earned income tax credit and child tax credit. Even overpayments of wage withholding which are still in the hands of the employer should probably be listed. Local practice should be checked.

Bankruptcy Basics: Automobiles

In the sample case the vehicle Ms. Reyes currently owns is listed on Schedule A/B. The value listed was obtained from a motor vehicle industry guide available on the internet. See Chapter 8, infra. The value of the property interest should be given without deduction for any exemptions or secured debts.