Bankruptcy is the filing of a petition with the bankruptcy
court to obtain protection from collection efforts of your
creditors. It is normally triggered when an individual's
debts exceed current income and property. At the end of
bankruptcy, some or all of the individual's debts will be
canceled.
Bankruptcy involves a Federal court proceeding in which
the individual's obligations are balanced against his or
her creditor's rights. The individual's objective is to
reduce or eliminate the debt completely ("wipe the
slate clean"). The creditor's objective, on the other
hand, is to collect as much of the debt as possible. The
bankruptcy proceeding is the forum in which the debtor and
the creditor resolve differences
WHAT IS INVOLUNTARY BANKRUPTCY?
Creditors, rather than the debtor, file the petition in
bankruptcy.
SHOULD I FILE FOR BANKRUPTCY? HOW DO I KNOW WHEN I SHOULD
DO SO?
This is a personal decision, greatly influenced by the
amount of serious debt and your ability to meet the original
payments or pay the full amount. Being hassled by creditors
when you are broke is nerve-wracking for starters. Secondly,
the decision to file should not be made solely to stop demanding
creditors. Though filing temporarily stops creditors from
engaging in out-and-out enforcement lawsuits, creditors
can apply for "relief from stay" and then continue
their collection efforts.
Depending on your circumstances, bankruptcy may or may
not make sense for you. If after the bankruptcy you will
be no better off than you were before, why do it?
Further, the critically important date of filing often
determines whether or not certain debts will bedischarged.
(This is to keep people from rushing out to buy a boat,
and then declaring bankruptcy the next day). The decision
as to when to file a bankruptcy petition should be based
upon the facts of the individual circumstances.
Be aware that you must divulge complete financial information
in a bankruptcy petition. Compiling a complete list of debts
and creditors is absolutely critical to the bankruptcy process.
If you inadvertently omit listing a debt, it may or may
not be wiped out, depending on your circumstances. A bankruptcy
attorney will help ensure that you are following the appropriate
form and content of the filing.
CREDITORS RIGHTS
WHAT RIGHTS AND REMEDIES DOES A CREDITOR HAVE IN THE
BANKRUPTCY CASE?
A secured creditor may ask the court for relief from stay
in order to proceed with the efforts to collect the collateral
pledged as security for the debt.
A non-secured creditor may file a complaint within 60 days
of the date set for the first meeting of the creditors.
The non-secured creditor's complaint is a request to the
court to find that the debt be determined to be non-dischargeable
under the Bankruptcy Code. However, if the court finds that
the debt is dischargeable it may require the creditor to
pay the debtor the costs, including reasonable attorney
fees, of the complaint, if it was not substantially justified
(note: there can be special circumstances which would make
such an award unjust).
CAN A CREDITOR ASK A DEBTOR TO REAFFIRM THE DEBT?
Yes, this means that the creditor is asking that the debtor
pay the debt anyway, even after it has been discharged.
A debtor may be willing to do this if there is a co-signer
or guarantor of the debt (such as a family member, friend
or employer) that the debtor does not wish to leave saddled
with the debt. Also, a debtor may want to reaffirm a debt
in order to avoid having a secured creditor take the collateral
provided for the debt. A creditor may also ask a debtor
to reaffirm the debt before he (the creditor) will agree
to do business with the debtor again.
WHAT USUALLY HAPPENS?
The most common participation by a creditor in a consumer
bankruptcy case (since the majority of these cases involve
no or very few assets) is to file a proof of claim and share
in the liquidation of the bankruptcy estate or under a proposed
plan. A proof of claim that is properly filed in accordance
with the rules governing bankruptcy cases is evidence of
the claim's validity and amount and is deemed allowed unless
objected to by the debtor or interested third party. Unsecured
creditors will not receive a distribution from the bankruptcy
estate unless a proper proof of claim has been filed in
the bankruptcy case. The proof of claim must be filed within
90 days of the date when the meeting of creditors was first
set (not including any continuances). |
