A bankruptcy petition is a form that a debtor files to commence a case before the Bankruptcy Court.  The debtor elects in the document the bankruptcy chapter under which he or she will proceed and provides certain other required identifying information.  The document is signed by the debtor under penalty of perjury.  Married individuals are allowed to file a joint petition whereby a single bankruptcy case is commenced for the two married individuals. 

These documents provide information about the debtor’s assets and liabilities.  In these documents, the debtor describes the nature and value of his or her property and lists the nature and amount of debts, the names and addresses of creditors, and the debtor’s current income and expenditures.  The statement of financial affairs for bankruptcy requires the debtor to disclose certain historic information about his or her financial affairs.  These documents must be fully completed and are signed by the debtor under penalty of perjury.

In order to be eligible to file for bankruptcy, an individual debtor must receive credit counseling within 180 days prior to filing a bankruptcy petition unless he or she qualifies for a temporary waiver of the requirement under 11 U.S.C. § 109(h)(3) or an exemption from the requirement under 11 U.S.C. § 109(h)(4) of the Bankruptcy Code.  Specifically, the law requires the debtor to receive from an approved agency a briefing to outline the opportunities available for credit counseling and the creation of a financial management plan.  This may be done in an individual or group session and may be completed in person, on the phone, or even via the Internet. The Court facilitates access to credit counseling by the public use of a telephone or computer to obtain such counseling.  A timely certificate of credit counseling is required and must be filed with the Court.

A list of court-approved credit counselors is available on the U.S. Trustee’s website or from this hyperlink:  Approved Credit Counseling Agencies.

Individual debtors with primarily consumer debts who file a petition for bankruptcy under Chapter 7, 11, or 13 must complete an income-based “means test.”  The means test calculates the difference between a debtor’s current monthly income (“CMI”) and his or her allowed expenses.  The means test is intended to determine whether a debtor has the “means” to repay some percentage of his or her non-priority unsecured debts.  In order to report and calculate a debtor’s CMI and allowed expenses for the completion of the means test, official forms B122A-1, B122A-1SUPP, and B122A-2 have been created for Chapter 7 debtors, B122B for individual 11 debtors, and B122C-1 and B122C-2 for Chapter 13 debtors.  In a Chapter 7, the means test may determine whether there is a presumption of abuse by the debtor in seeking relief under Chapter 7.  Forms B122B, B122C-1 and B122C-2 can be used to determine the appropriate payment plan for debtors in Chapters 11 and 13. 

“Property of the Estate” is a term of art used in the Bankruptcy Code.  The term includes nearly all of the debtor’s property at the time the debtor files the petition.  In a Chapter 13 case, the term also includes a debtor’s post-petition wages and other property that the debtor acquires before the case is closed.  Property of the Estate is protected by the automatic stay absent a lifting of the stay by court order or operation of law. 

The filing of a bankruptcy petition automatically stays (stops) most actions against the debtor or the debtor's property, such as collections, foreclosures and repossessions.  It is called "automatic" because the stay typically begins automatically at the time the bankruptcy case is filed with the Clerk's Office. There are certain exceptions to the automatic stay, such as if you have filed bankruptcy in the past and your case was dismissed (depending on the number of cases and the time period since dismissal of the previous case). Once the stay is in place, creditors are prohibited from taking certain actions against a debtor without permission from the Court. Some creditors, particularly those involved with repossessions or foreclosures, may immediately file a motion to lift the automatic stay with the Court to seek the ability to go forward with foreclosure or repossession actions.  The legal authority for obtaining relief from the automatic stay can be found in section 362 of the Bankruptcy Code.  See 11 U.S.C. § 362(d), Fed. R. Bankr. P. 4001, and 7. What can I do if a creditor keeps trying to collect money after I have filed bankruptcy?

The Meeting of Creditors, also known as a 341 Meeting (so-called after § 341 of the Bankruptcy Code), is a meeting that a debtor is required to attend after filing for bankruptcy. The meeting is conducted by the case trustee or the U.S. Trustee. The bankruptcy judge does not attend this meeting. The debtor must appear at this meeting and testify under oath about his or her financial condition, assets, and liabilities. The debtor will be asked questions about the information contained in the bankruptcy paperwork filed with the Court. Creditors may also attend this meeting and may question the debtor about his or her financial affairs. If a debtor fails to attend this required meeting, the case trustee may seek to dismiss the bankruptcy case. A debtor typically cannot receive a discharge in bankruptcy without attending this meeting.

The Meeting of Creditors is held within a certain time period after the bankruptcy case is commenced. Within about a week after the bankruptcy case is filed, the debtor will receive notice by mail of the date and time of the Meeting of Creditors, which will be contained in the Notice of Bankruptcy Filing. The debtor is required to bring certain identification information to this meeting and the trustee may request further information about the debtor’s financial affairs.

An “exemption” is a statutory right that an individual debtor may exercise to exempt the equity in certain real and personal property from certain creditors.  If there is no non-exempt equity in your property, after considering its value, consensual liens, and the amount of the exemption, then your trustee may determine that the property should not be sold for the benefit of your creditors or that such property should not be considered in determining the amount of your payment under a Chapter 13 plan.  An exemption has no effect on the rights of a creditor with a consensual lien, such as a mortgage creditor or a creditor that financed the purchase of a vehicle.  However, an exemption may be used to reduce or eliminate a judicial lien if the debtor’s non-exempt equity in the property, to which the lien has attached, is less than the amount of the lien. See (CreditorFAQ #11) What is Lien Avoidance? A debtor takes an exemption by completing Schedule C.  Most exemptions allowed under South Carolina law are found in S.C. Code Ann. § 15-41-30. Whether you can claim the exemptions allowed by South Carolina law depends upon how long you have been a resident of South Carolina.

The plan, generally filed by the debtor in a Chapter 13 case, states how the debtor proposes to pay their various debts. Creditors and other parties in interest are served with the plan and have an opportunity to object to a proposed plan.  The plan does not become effective until the Court confirms it after a hearing.  The form Chapter 13 plan used in this District is found at the local forms section of the website.

If the debtor cannot make a Chapter 13 payment on time according to the terms of the confirmed plan, the debtor should contact his or her attorney, if represented, or the Chapter 13 trustee to explain the problem.  Under certain circumstances, the Chapter 13 trustee may agree to allow the debtor to catch up on the missed plan payments.  Significant changes in the debtor’s circumstances may require that the plan be amended by motion of the debtor.  The debtor may also be able to seek a temporary stay of plan payments by filing a motion for a moratorium.  The debtor may also seek an order for a hardship discharge to obtain a limited Chapter 13 discharge and end the Chapter 13 case if certain criteria are met.  If the problem in making payments is permanent and the debtor is no longer able to make payments under the plan, the trustee may request that the Bankruptcy Court dismiss the case or convert the case to one under another chapter.

A reaffirmation agreement is an agreement by which a Chapter 7 debtor becomes legally obligated to pay all or a portion of an otherwise dischargeable debt.  In order to be effective and enforceable, the agreement must be properly executed and filed in the debtor’s bankruptcy case.  The debtor has a certain period of time to enter the reaffirmation agreement and, if applicable, rescind the reaffirmation agreement.

If the reaffirming debtor is not represented by an attorney, the Court will hold a hearing on the agreement.  In some instances, the Court will hold a hearing even when the debtor is represented by counsel.  The debtor must appear in person at the hearing.  The judge may ask questions about the reaffirmation agreement, including whether it imposes an undue burden on the debtor or on his or her dependents, and whether it is in the debtor’s best interest. 

Redemption allows an individual debtor in a Chapter 7 case to keep tangible, personal property intended primarily for personal, family, or household use, by paying the holder of a lien the lesser of the amount of the lien or the value of the property.  Redemption is an alternative to reaffirmation.  The property redeemed must be property that is exempt or that has been abandoned by the Chapter 7 trustee. With redemption, a debtor can often get liens released on personal possessions for much less than the underlying secured debt; however, unless the creditor consents to periodic payments, redemption must generally be made in one lump sum payment to the creditor.  If the debtor and creditor agree to the redemption, just a consent order of redemption is required. However, if the redemption is opposed, a motion for redemption and a request for hearing should be filed.  As with reaffirmation, the Bankruptcy Code imposes certain deadlines by which the debtor must seek redemption of his or her property.

Executory contracts are unfulfilled contracts whereby each party to the contract has remaining obligations.  A typical example of such contracts is a lease for property, such as a home or a vehicle, or a rent-to-own agreement.  In bankruptcy such contracts must be “assumed” for the debtor to continue to have rights under the agreement.  As with reaffirmation agreements and redemption, the debtor must take timely action to assume his or her executory contracts, otherwise the contracts may be deemed “rejected” and the automatic stay may be lifted. 

The "Certification About a Financial Management Course" Certificate in Chapters 7 and 13 must be completed before a discharge is entered, unless the debtor qualifies for a temporary waiver or exemption from the requirement under 11 U.S.C. § 109(h).
 
Chapter 7:     If you have filed a Chapter 7 petition, you must complete a course in personal financial management and file your certificate with the Court within 45 days of the first date set for the Meeting of Creditors or your case will be closed without a discharge. See Fed. R. Bankr. P. 1007

Chapter 13:     If you have filed a Chapter 13 petition, you must complete a course in personal financial management and file your certificate with the Court no later than the last payment made as required by the plan or the filing of a motion for entry of discharge under § 1328(b), or your case will be closed without a discharge.  See Fed. R. Bankr. P. 1007(b)(7) and (c); SC LBR 3015-5.

The U.S. Trustee's Office provides a list of Approved Financial Management Course Providers.

A bankruptcy discharge releases an individual debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay the debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.  Although a debtor is not personally liable for discharged debts, a valid lien that has not been avoided (e.g., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.  Corporations and similar entities are not eligible for a discharge.

With regard to the timing of discharge, each case is different.  In a Chapter 7 case, a debtor's discharge is usually entered between 90 to 120 days after the case was filed assuming the debtor complies with all obligations required by the Bankruptcy Code.  The entry of a discharge may take longer if a debtor's entitlement to the discharge is contested by the case trustee or creditors. In a Chapter 13 case, a discharge is entered upon the successful completion of the Chapter 13 plan, usually between 36 to 60 months following bankruptcy. In a Chapter 11 case, the debtor also formulates a plan of reorganization. Therefore, the Chapter 11 process may take several years to complete upon which time the debtor may be eligible for a discharge.

Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code.  A slightly broader discharge of debts is available to a debtor in a Chapter 13 case than in a Chapter 7 case. Section 523(a) of the Bankruptcy Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those nondischargeable debts after bankruptcy. The most common types of nondischargeable debts are certain types of tax claims, debts for domestic support obligations, debts for willful and malicious injuries to person or property, debts to governmental units for fines and penalties, debts for most government funded or guaranteed educational loans or benefit overpayments, debts for personal injury caused by the debtor's operation of a motor vehicle while intoxicated, and debts owed to certain tax-advantaged retirement plans. Other types of debt, such as obligations incurred as the result of fraud, embezzlement, or willful injury may be excepted from discharge if the creditor successfully brings a nondischargeability action against the debtor. 

The discharge order only relieves the debtor of the personal obligation to pay the debt.  Valid liens against the debtor’s property that existed prior to the date the debtor filed for bankruptcy generally pass through the bankruptcy unaffected.  However, certain liens may be avoided (e.g. made unenforceable) during bankruptcy or may be satisfied through a plan or reorganization. 

The best course of action will depend on the specific facts involved.  It is recommended that a debtor contact an attorney with any questions.  Making the creditor aware that the discharge order was entered and that the order applies to the creditor’s debt often resolves the collection action.   If the creditor continues its attempts to collect a discharged debt, the discharge order may used as a viable defense to the collection action.  The debtor may also file an appropriate pleading in the Bankruptcy Court for a determination that the debt was discharged or alternatively to seek damages for a creditor’s violation of a discharge order. 

A dismissal order ends the case and removes most matters from the Bankruptcy Court’s jurisdiction. Dismissal does not mean the case was never filed or erase the case from the Court’s records.  The filing of the case and the dismissal remain a matter of record. When the Court dismisses a case, the automatic stay is no longer in effect and creditors may start to collect on their debts again. Some types of dismissals may contain a bar or prejudice period that prohibits the debtor from refiling another bankruptcy case.

A bankruptcy generally affects a person’s credit rating for 7 to 10 years. However, this depends entirely on the individual credit reporting agency. The Bankruptcy Court does not have influence on the type of information the credit bureaus report or how long the credit bureaus keep the filing in their records.  Under federal law, you may be able to periodically receive a free copy of your credit report from each of the three major credit reporting agencies. Each agency's report may contain different information. To receive a free annual credit report, you can visit www.annualcreditreport.com or you can call or send a written request to:

Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281
1-877-322-8228

The Fair Credit Reporting Act, 15 U.S.C. § 1681, is the law that controls credit reporting agencies. If you believe that there is an error in your credit report and want to correct it, you should contact the credit reporting agencies directly at:

Equifax – www.equifax.com / 1-800-685-1111
Experian – www.experian.com / 1-888-397-3742
TransUnion – www.transunion.com / 1-800-916-8800

Further information may be obtained from the Federal Trade Commission website at “How to Dispute Credit Report Errors.”

The Federal Trade Commission, Bureau of Consumer Protection, Education Division, Washington, D.C. 20580 may also be contacted. The toll-free telephone number is 1-877-382-4357.  That Office may be able to provide further information on reestablishing credit and addressing credit problems.

Generally, student loans made, insured, or guaranteed by the federal government are not discharged in a bankruptcy case. If continued payment of the student loan would cause you an undue hardship, you may file an adversary proceeding to request the debt be discharged. Unless loan payments are restructured by a student loan repayment program or confirmed plan, you should continue to pay any student loan in accordance with the terms of the loan. Refer to 11 U.S.C. § 523(a)(8) for more information about the discharge of this debt and the Department of Education’s website for further information about student loans.