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Bankruptcy Basics: SCHEDULE D—SECURED CREDITORS

Schedule D lists all secured creditors. This schedule should include all creditors that hold liens, even if they are undersecured, and even if their liens can later be avoided by the debtor or the trustee. These liens may include judgment and statutory liens, garnishments, mortgages, and deeds of trust. Creditors holding security deposits also should be listed here, as well as creditors holding less obvious types of security interests such as those that arise by operation of law, like a tax lien, rather than from a security agreement.

Bankruptcy Basics: SCHEDULE H—CODEBTORS

The debtor’s codebtors, other than a spouse in a joint case, should be listed on Schedule H. The instructions for the official form provide that, in community property states, a married debtor not filing a joint case should always report the name and address of any non-debtor spouse within the previous eight years. Codebtors may also be listed as creditors on Schedule E/F due to any potential subrogation claims that could arise if the codebtors later pay off the obligation. Debtors that have no codebtors should check the applicable box. In the sample case Ms.

Bankruptcy Basics: SCHEDULES I AND J—INCOME AND EXPENSES

The last two parts of Official Form 106 are Schedules I and J which require a complete disclosure of the debtor’s income and expenses. In chapter 7 cases, these schedules are intended to provide information that could help a bankruptcy court to determine whether a chapter 7 case might be an “abuse” and therefore subject to dismissal under section 707(b). In chapter 13 cases, Schedules I and J allow the trustee and creditors to determine whether the debtor’s plan is feasible and whether it is in compliance with plan requirements.

Bankruptcy Basics: Overview

Schedule I must include income for both spouses in a joint case and also when one spouse files a case individually, unless the spouses are separated. Ms. Reyes is not married, so the column labeled “Debtor 2 or non-filing spouse” is left blank. The instructions for the form state that the income to be included on Schedule I is an “[e]stimate” of “monthly income as of the date you file this form.” For wage income, the form asks the debtor to provide both gross and net take home pay, and to list the applicable payroll deductions.

Bankruptcy Basics: Food Stamps and Other Public Benefits

Even though some public assistance benefits such as Food Stamps (under the Supplemental Nutrition Assistance Program (SNAP)) or rental/utility allowances may not be treated as income for many purposes, they should be listed in response to line 8f on Schedule I and offset by including a relevant expense in the same amount in the appropriate category on Schedule J. This approach may be especially important in a chapter 13 case to show how the debtor is able to pay a particular expense.

Bankruptcy Basics: SUMMARY OF YOUR ASSETS AND LIABILITIES AND CERTAIN STATISTICAL INFORMATION

Accompanying the schedules is a form summarizing debts, property, income, and expenses. The form is self-explanatory. Bankruptcy software programs will typically insert the applicable figures from the schedules automatically once the schedules are completed. After the summary is filled out and reviewed for accuracy it is usually inserted at the front or back of the schedules for filing, or elsewhere if required by local practice. Line 9 of the form is used by the courts solely to gather statistics mandated by law.

Bankruptcy Basics: DEBTOR’S DECLARATION

After the schedules have been prepared, reviewed by the debtor, and any final corrections made, the debtor must sign the declaration (Official Form 106Dec). The debtor should be advised that they are declaring under penalty of perjury that the summary and schedules have been read and that they are “true and correct.” As with the petition and any other documents signed by the debtor and filed electronically, local rules in some districts require that the debtor’s attorney maintain a copy of the declaration containing a “wet signature” by the debtor for a specified period of time.

Bankruptcy Basics: Overview

The statement of financial affairs (Official Form 107) is also required to be completed by all debtors. 11 U.S.C. § 521(a)(1)(B)(iii); Bankruptcy Rule 1007(b)(1). The form contains detailed questions that must be answered, but it is relatively simple to fill out. It is important to pay careful attention to the specific time period requested, as various questions ask for information about several different time periods. Each question includes a box labeled “no” which should be checked if that is the appropriate response to the given question.

Bankruptcy Basics: Part 2

This Part contains two questions which address the debtor’s income history. The information to be included in response to these questions goes back several years and therefore may be different from the expected future income included in Schedule I. In general, though, the responses on this form should be cross-checked with the schedules to ensure that all of the documents are consistent.

Bankruptcy Basics: Part 5

This Part concerns gifts and contributions made by the debtor. Question 13 asks about gifts totaling $600 or more per person within the proceeding two years, and question 14 asks for similar information regarding gifts to charities. Gifts and charitable contributions with a total value of $600 or less per recipient do not need to be listed. The amount listed on Schedule J as an ongoing expense for charitable contributions, if regularly made, should be consistent with the total amount disclosed here (or the debtor should be prepared to explain any inconsistency).

Bankruptcy Basics: Part 6

This Part contains one question, question 15, which asks the debtor to disclose all losses from fire, theft, other casualty, or gambling within the previous year. If the debtor has such a loss, it should be listed here and any related claim for insurance proceeds should be listed in Schedule A/B and exempted on Schedule C if possible.

Bankruptcy Basics: Part 7

This Part contains questions designed to include many other types of transfers not included in prior questions. Question 16 asks about payments related to consultations regarding bankruptcy, including with petition preparers. If the debtor was required to pay for her prepetition credit and budget counseling briefing, that payment should be listed here. All other payments made within the previous year for counseling and bankruptcy-related services, including those for the current bankruptcy filing, should also be listed.

Bankruptcy Basics: Part 8

Part 8 deals broadly with financial accounts and property in storage. Question 20 requires listing any financial accounts that were closed within the year previous to the bankruptcy filing, whether they were in the debtor’s name or for the benefit of the debtor. These may include checking and savings accounts, certificates of deposit, credit union accounts, pension funds, brokerage accounts, and other types of financial accounts.

Bankruptcy Basics: Part 9

Question 23 deals with property held by the debtor but belonging to another person. Property held in trust for another or in a Uniform Transfer to Minors account should also be listed here.

Bankruptcy Basics: Part 10

This Part (questions 24 to 26) seeks information concerning potential environmental liabilities of the debtor. Although few debtors have such liabilities, any debtor who has received a notice that they may have an environmental violation, or who is subject to a judicial or administrative proceeding under an environmental law (which is broadly defined in the question), must provide information about that potential liability.

Bankruptcy Basics: Part 11

This Part is intended to identify debtors who have been in business within the previous four years. Every debtor must either check one of the applicable boxes concerning a business in response to question 27 or check the box marked “No.” If the debtor has not been in business during this period and answers “No,” the remainder of question 27 and question 28 need not be answered.

Bankruptcy Basics: Part 2

Part 2 of Form 122A-1 determines whether, according to the form’s methodology, the section 707(b)(7) safe harbor from the means test applies. The income calculated in Part 1 of Form 122A-1 is compared to the applicable median family income for the debtor’s state and household size. As discussed above the debtor may disagree with that methodology to the extent that it includes the income of a non-debtor spouse.

Bankruptcy Basics: Form Completion for Debtors Below Median Income

Having completed these parts of the forms, most debtors may proceed to sign the verification. Only debtors whose incomes listed in Part 2 of Form 122A-1 and Part 2 of Form 122C-1 are above the applicable state medians must additionally complete forms 122A-2 or 122C-2, respectively. Chapter 7 debtors whose incomes in Part 2 are below the state’s median income must also check the box labeled “There is no presumption of abuse” at the top of the first page of the form.

Bankruptcy Basics: DISCLOSURE OF ATTORNEY COMPENSATION

In every case a disclosure of fees paid to the debtor’s attorney must be filed. 11 U.S.C. § 329; Bankruptcy Rule 2016(b). Form B2030, though not an Official Form, has been promulgated by the Administrative Office of the United States Courts to fulfill this requirement. The purpose of this form is to allow the court and the United States trustee, who also must receive a copy, to monitor fees and to make sure that they are reasonable. Because no fee is paid to legal services or pro bono attorneys by their clients, completion of this form should pose no difficulty.

Bankruptcy Basics: Property of the Estate

The commencement of a bankruptcy case creates an “estate.” 11 U.S.C. § 541. Based on the broad definition of “property of the estate” found in section 541, virtually all assets and property interests of the debtor as of the time the case is filed come into the bankruptcy estate and are subject to being administered for the benefit of creditors if not exempt (as discussed below). Such property includes intangible, contingent, and future property interests, such as any interest a debtor has in any pending lawsuit or potential cause of action, or any anticipated tax refund.

Bankruptcy Basics: Overview.

While there are six types of bankruptcy cases provided for under the Bankruptcy Code, the choice for most consumers will be between filing under chapter 7 or chapter 13. An overview of these two chapters most used by consumers is provided later in this Chapter. What is provided here is a short description of the various chapters that will assist the attorney in satisfying the certification on the bankruptcy petition (Official Form 101).

Bankruptcy Basics: Chapter 7.

A case filed under chapter 7 is often called a “liquidation.” In a chapter 7 case, the debtor’s assets are examined by a court-appointed trustee to determine if anything is available to be sold or recovered for the benefit of creditors. Certain property cannot be liquidated by the trustee because it is “exempt.” In most consumer bankruptcy cases virtually all of the debtor’s assets are exempt.

Bankruptcy Basics: Chapter 13.

A case filed under chapter 13 is often called a “reorganization” because it provides for the “adjustment of debts.” Chapter 13 cases work very differently than chapter 7 liquidations and provide the debtor with the opportunity to adjust their financial affairs without needing to liquidate assets. In a chapter 13 case the debtor submits a plan to repay creditors all or part of the money owed them over a three to five year period, usually funded from future income.

Bankruptcy Basics: Chapter 11.

Chapter 11 is designed for the reorganization of a business but is also available to individual consumer debtors. However, because its provisions are complicated and of questionable benefit for low- and moderate-income debtors, and there are additional expenses, the filing of a chapter 11 petition by a consumer debtor is generally not advisable.

Bankruptcy Basics: Chapter 12.

Chapter 12 is designed to permit family farmers and fishermen to repay their debts over a period of time in a manner similar to chapter 13, usually from future earnings. Based on the eligibility requirements, use of chapter 12 is generally limited to those whose income comes primarily from a family-owned farm or commercial fishing operation.