Category Archives: bankruptcy

Credit Counseling: The “First” Course

Before filing for bankruptcy, you must be certain that it is the best option, as it can have serious and long-lasting effects on your credit, possessions, and income. The first course, pre-filing credit counseling, helps you determine whether bankruptcy is the best option. In this course, you will evaluate your financial situation and investigate alternative repayment options. If, after completing the course, it still makes sense to file for bankruptcy, you will submit a certificate of course completion along with your petition and schedules to demonstrate that you fulfilled the education requirement (the official paperwork that initiates the case). You can take the course online or over the phone and most people complete it in an hour or two.

Educating Debtors: The “Second” Course

You’ll take the post-filing debtor education course (or “second” class) after you file your bankruptcy. The second course will provide you with financial management tools that you’ll be able to rely on after your bankruptcy is over.

In a Chapter 7 bankruptcy, you must file your completion certificate with the court no later than 60 days after the date first set for the 341 meeting of creditors (the hearing that all bankruptcy filers must attend) (the hearing that all bankruptcy filers must attend). The court will remind you by sending a notice entitled “Notice of Requirement to File a Certification of Completion of Course in Personal Financial Management.” Chapter 11, 12, and 13 filers can submit the completion certificate anytime before making the final payment under the repayment plan.

Not only is it easy to forget to complete the coursework, but failure to submit the certificate will result in a fine. The court will dismiss your lawsuit without discharging (wiping out) your qualifying debt, and you’ll have to refund the filing fee to reopen it. Worse yet, in many courts, you won’t be able to file the certificate until you file a motion asking the court to accept the late-filed certificate and the judge grants your request (and you might have to file an additional motion asking for your discharge) (and you might have to file an additional motion asking for your discharge).

Who Must Complete the Courses?

All individuals who file a Chapter 7, 11, 12, or 13 bankruptcy must complete a credit counseling class and a debtor education training course before receiving debt relief—even if the individual’s debts are primarily business debts.

This regulation involves a husband and wife filing jointly (together) (together). Each must satisfy the condition. In contrast, business entities are exempt, including partnerships, limited liability companies, and corporations.

You might be exempt from the requirement if you must file an emergency case, or you’re in a military zone. Nevertheless, such exceptions are uncommon.

To find a course that fits the requirements of the courts in your bankruptcy jurisdiction, visit the U.S. Trustee’s website and select from a list of recognized providers.

A swift bankruptcy petition can prevent imminent creditor action. Find out how quickly you may file an emergency bankruptcy filing online.

Sometimes it is necessary to quickly halt a creditor’s action. Filing for bankruptcy is beneficial. When you file a case, the court automatically issues a stay prohibiting most creditors from pursuing collection efforts (exceptions exist).

However, filling all the bankruptcy forms is not an easy task. If time is of the essence, you can use an expedient online bankruptcy filing process known as an emergency bankruptcy filing (or skeleton file) to obtain the automatic stay and submit the remaining documentation later.

Online Filing of Emergency Bankruptcy Forms

Upon completion, the average bankruptcy petition can easily exceed fifty pages. When facing a foreclosure auction, repossession, wage garnishment, collection action, or another time-sensitive issue, however, it may not be possible to complete all of the paperwork.

You have alternative options.

When you need to file bankruptcy quickly, you can file your forms online quickly. In addition, you can access online filing 24 hours a day, seven days a week, and you can begin the online filing procedure by uploading a small fraction of the required forms:

• The petition for bankruptcy (the principal document containing identifying information, the chapter you’re filing under, and other general information)
• the names and addresses of the creditors that will be mentioned in the bankruptcy schedules (commonly referred to as a creditor mailing list or mailing matrix; verify format requirements with your court).
• a certificate indicating that you fulfilled the credit counseling requirement or a waiver request, and
• Statement Regarding Your Social Security Numbers on Form B121.

You should also be prepared to pay a filing fee, submit a request for a fee waiver, or submit a request to pay the filing charge in installments.

Finalizing a Skeleton Bankruptcy Filing

Your skeleton bankruptcy case will be dismissed if you do not provide the extra documents within 14 days. Also, be aware that certain courts may request alternative forms. The prerequisites are outlined in the local rules posted on your court’s website.

Emergency Bankruptcy Filing Procedures

For an urgent filing, you need take the following steps:

• Step 1: Contact the court clerk or visit the court’s website to determine which forms are required for an emergency filing.
• Step 2: Complete the Individual Voluntary Petition for Bankruptcy.
• Step 3: On the list of creditors, you will include the names and addresses of everyone you owe money to, along with collection agencies, sheriffs, attorneys, and anybody else attempting to collect debts from you. Use the address that appears on the most recent billing statement or court filing.
• Step 4: Complete the form Your Statement Regarding Your Social Security Numbers.
• Step 5: Complete any other paperwork required by the court (for instance, in some jurisdictions you must file a cover sheet and an order of dismissal that will be executed if you fail to submit the remaining documents).
• Step 6: Submit the originals and the requisite number of copies with your fee, a fee waiver application, or a request to pay the fee in installments, along with a self-addressed envelope, to the court clerk. Save duplicates for your records.
• Step 7: Submit the remaining forms within 14 days to prevent case dismissal.

Obtaining and Filling Out the Bankruptcy Forms

See Forms You Must File in Chapter 7 Bankruptcy for a complete list of Chapter 7 bankruptcy forms. See Completing the Bankruptcy Forms for information on each of these forms, as well as basic instructions on how to complete them.

You can increase your chances of getting paid by contacting clients who are facing collections.

When it’s time to get paid, a small business owner may face their biggest challenge yet. Fortunately, you can reduce late payments and build a business radar that alerts you when an account is on its way to collections with a little advance planning. By maintaining open lines of communication and assisting clients who are experiencing financial difficulties as they get through a difficult time, you might gain loyal clients for life.

Customers who are slow to pay typically fall into three categories:

• Customers who want to pay but are unable to do so on time due to legitimate financial difficulties.
• Customers who favor to juggle or postpone payments.
• Customers who will take any action necessary to avoid making a payment.

There is hope for the first two categories. You might be able to control these debts and persuade the debtors to pay in full or in part. Regarding the final group, you must identify it as soon as you can and take serious action, perhaps handing the account over to a collections agency (discussed below).

No matter what efforts you make to collect, the following rule is always true: As soon as you can, get to work, and continue working on the account until you are paid. Send bills promptly, and send new bills every month. There is no need to wait until the month’s end. Once an account is past due, send reminder letters as soon as possible.

More advice is offered below:

• No harassing. Don’t bother those who owe you money, but let them know you are keeping an eye on the situation. You shouldn’t call a debtor more than once per day, and you shouldn’t ever leave messages that contain threats or disparaging remarks about the debtor.
• Don’t get personal; be direct, listen, and direct. Calls should be brief and specific. According to Carol Frischer, a specialist in collections, your aim should be to stop the debtor from taking the call personally, or from equating the failure to pay as a failure in life. Always maintain your composure while maintaining a sense of urgency regarding getting paid.
• Be imaginative. Ask the customer how much they can reasonably afford to pay if they are experiencing real financial difficulties. If the client accepts a new payment schedule in writing, take into account extending the payment deadline. Make sure the customer intends to abide by the agreement by calling the day before the following scheduled payment is due.
• Write letters of demand. Send a series of escalating letters along with the phone calls. Save copies of all communications you have with the customer, and make sure to take notes during every call. If you send the case to a collections agency or take the client to court, you might need these.
• Send letters using a collection agency. A fixed fee can be paid to a collection agency to have them send out several letters on your behalf. This is distinct from giving the debt to a collection agency.
• Offer a substantial one-time discount. If a fairly large account goes unpaid for a prolonged period of time (let’s say six months), and you have doubts about ever being able to recover the debt, you might want to think about making a written offer for a time-limited, substantial discount to settle the matter. A mutual release and settlement, a formal document that discharges the debt, can be used to put an end to this.
• Send the debt to a collection company. Your last resort is to send a debt to collections. Typically, a collection agency will pay you 50% of the money it collects. Of course, there are instances where half is preferable to nothing.

It’s a common misconception that when a debtor files for bankruptcy, all of their creditors are left in the dark, but this isn’t always the case. Money is readily available to pay creditors in almost all Chapter 13 cases and some Chapter 7 cases.

However, debtors are not automatically reimbursed. A creditor must use an official proof of claim form to submit a “proof of claim” to the court before they can get paid. Additionally, not all debts owed to creditors are handled equally.

Priority claims are obligations that are eligible for special consideration and will be paid before nonpriority claims. The creditor certifies whether a priority status exists by checking the box next to it in box 12 on the proof of claim form.

All claims submitted will be evaluated by the bankruptcy trustee, who has been appointed by the court to manage the case. The trustee will distribute money to priority creditors following the resolution of objections and confirmation of the plan in Chapter 13 bankruptcy. The trustee will pay claims without regard to priority if there is money left over.

Here are some typical priority claim examples:

• administration fees for the bankruptcy (such as accounting or legal fees)
• obligations for child and spousal support
• 180 days prior to bankruptcy, compensation of up to $15,150 was earned (wages, commissions, and other compensation)
• contributions to an employee benefit plan of up to $15,150
• deposits made by the filer to secure future personal goods, services, or housing are allowed up to $3,350.
• a fisherman may receive up to $7,475 for unpaid fish sold to a storage or processing facility.
• the government’s unpaid taxes, and
• Injury or fatality claims resulting from drunk driving-related car or boat accidents.

These numbers are valid as of April 1, 2022, and they continue to be so until March 31, 2025.

In a Chapter 13 case, each creditor requesting payment is required to submit a claim. If it appears that a Chapter 7 case is a “asset case,” meaning that funds will be available for distribution, the court will order creditors to submit claims. In contrast, in a “no-asset case,” creditors won’t submit claims.

What is the Best Effort Requirement of Chapter 13?

The bankruptcy trustee is appointed following the filing of the repayment plan. The trustee and your creditors will review your proposed repayment plan to ensure that it satisfies all bankruptcy requirements. Before being finalized, your repayment plan must also be approved (confirmed) by the court.

Paying your disposable income to nonpriority unsecured creditors (such as credit card companies) in your repayment plan will demonstrate that you are making every effort to repay your debts. After deducting allowed living expenses and mandatory payments, such as secured and priority debt payments, your disposable income is the amount remaining. (Secured debts are backed by collateral, such as a mortgage or an automobile loan. Priority debts are those that warrant advancement to the front of the payment queue. Examples include domestic support obligations and tax debt.)

You will apply your discretionary income to your remaining debt (nonpriority unsecured debt, like credit card balances and medical bills).

What Will I Pay Unsecured Nonpriority Creditors?

• Using the Chapter 13 Calculation of Your Disposable Income form, you will subtract the following from your income to determine your disposable income:
• Expenses for living based on national and regional norms, as well as some actual amounts
• secured payments, such as mortgage or auto loan payments (and any delinquent payments), and
• Priority debts include arrears on child support and certain tax debts.
• Over the course of five years, you will be required to pay a minimum of your monthly disposable income to your non-priority unsecured creditors.

Why Will I Be Charged More If I Own a Large Property?

The analysis continues further. In determining whether to confirm your repayment plan, the judge will also consider whether your creditors will receive the same amount through your Chapter 13 plan as they would if you filed for Chapter 7 bankruptcy.

Here is why this is important:

In Chapter 7 bankruptcy, the trustee sells all nonexempt assets (those that are not protected by exemptions). The funds are allocated first to the priority creditors, and then, if anything remains, to the non-priority unsecured creditors.

• Chapter 13 bankruptcy, on the other hand, allows you to keep non-exempt property. However, your creditors will not permit you to receive a windfall. To ensure that your creditors receive the same amount as they would under Chapter 7, you must pay the greater of:
• the sum of your total priority debt and your disposable income, or
• the market value of your taxable property.

Except: If You Were Eligible for Chapter 7

If you qualify for Chapter 7 but file for Chapter 13 for another reason, such as to save your home, you will not be required to calculate a monthly disposable income figure. Your plan payment will be based on your financial situation. The bankruptcy court will typically approve your Chapter 13 plan even if you’re paying non-priority unsecured creditors little or nothing. Additionally, the duration of your plan is reduced from five to three years.

Discover what it means if the bankruptcy trustee objects to your Chapter 13 plan’s confirmation and what you can do.

If you file for Chapter 13 bankruptcy and your proposed repayment plan violates all applicable bankruptcy laws, the bankruptcy trustee may object to your plan’s confirmation (approval). The following sections will discuss why the trustee may object to your Chapter 13 plan and your options if the trustee does object.

The Chapter 13 Plan and Confirmation by the Court

Chapter 13 bankruptcy is frequently referred to as a reorganization bankruptcy due to the fact that you repay some or all of your debts via a repayment plan. When you first file for Chapter 13, you present the trustee, your creditors, and the court with an initial repayment plan. After filing your case, you must immediately begin making plan payments to the trustee (your first payment is typically due within 30 days). However, your plan does not become permanent until it is confirmed by the court (which can take up to several months). (For more information on the Chapter 13 repayment plan, click here.)

Generally, unless the trustee or one of your creditors objects, the court will approve your plan. However, if you fail to submit a workable plan that complies with all applicable bankruptcy laws, the trustee may object to its confirmation.

When a Trustee May Disagree with Your Chapter 13 Plan

Numerous requirements must be met in order for the court to approve your proposed Chapter 13 plan. Generally, the trustee will oppose your plan if:

• In your plan, you do not pay all of your disposable income to unsecured creditors (learn about how your disposable income affects your Chapter 13 plan)
• You lack the financial means to make your plan payments.
• Your plan does not pass the test of being in the best interests of creditors (which states that your plan must pay your unsecured creditors at least an amount equal to what they would have received in Chapter 7 bankruptcy)
• Your plan excludes certain debts that you are required to repay (learn about debts you must pay back in your Chapter 13 plan)
• Your plan is either too short or too long in duration (learn about how long your Chapter 13 plan must last)
• You do not provide the trustee with all of the necessary supporting documents (such as tax returns or pay stubs).
• you are in arrears with your plan payments, or
• Otherwise, your proposal is not made in good faith. (Learn about the Chapter 13 good faith requirement.)

What Happens If Your Chapter 13 Plan Is Rejected by the Trustee?

One of the trustee’s primary responsibilities in Chapter 13 bankruptcy is to maximize payment to your unsecured creditors. This means that the trustee will almost always argue that you should be contributing more to your Chapter 13 plan. As a result, trustee objections are extremely prevalent in Chapter 13 bankruptcy. (Learn more about the Chapter 13 trustee’s role.)

If the trustee wishes to object to your plan, he or she will typically file a written objection to confirmation with the court, outlining the reasons why the court should reject your proposed plan. If you do not respond to the trustee’s objection, the plan will most likely be denied confirmation by the court. If you wish for the court to approve your plan following the trustee’s objection, you must file a written opposition explaining why you believe your plan is ready for confirmation.

Your Alternatives If the Trustee Disapproves of Your Plan

In the majority of cases, you can:

• rectify your errors
• submit a revised plan, or
• To resolve the objections, negotiate with the trustee.

However, if you are unable to reach an agreement with the trustee, you must be prepared to argue your case before a judge during the Chapter 13 confirmation hearing (discussed below).

Confirmation Hearing under Chapter 13

Following your Chapter 13 bankruptcy filing, the court will schedule a confirmation hearing to determine whether or not to approve your plan. If no objections are raised by the trustee or your creditors to your proposed plan, the court will confirm it at the hearing. (Learn more about the confirmation hearing for Chapter 13 bankruptcy.)

However, if the trustee files an objection to your plan and you are unable to resolve it prior to the confirmation hearing, you must explain to the judge why you believe your plan should be confirmed. Following your presentation, the trustee will have an opportunity to make an argument.

The judge will decide whether or not to confirm your plan after hearing both sides. If the judge determines that additional evidence is required, he or she may also continue the hearing or remand the case for trial or evidentiary hearing.

Defaulting on your Chapter 13 plan (failing to make payments) has a number of unfavorable consequences. This may result in your creditors obtaining court permission to foreclose on your home or repossess your car. Alternatively, the court may dismiss your case or never approve it at all. Discover some of the potential consequences of failing to make a Chapter 13 repayment plan payment, as well as options for resolving your bankruptcy.

After you file for bankruptcy, the bankruptcy court will determine whether your proposed repayment plan is feasible. Even though this “confirmation” (approval) process can take several months, you will begin making payments approximately one month after filing and will maintain current monthly plan payments until confirmation. If you do not keep up with your plan payments, your bankruptcy case will be dismissed.

Confirmations are frequently delayed when a trustee or creditor objects to the proposed Chapter 13 plan at the outset. If the confirmed amount is greater than the agreed-upon three- or five-year repayment period, the plan payment will be adjusted to ensure that you can complete the plan within the agreed-upon three- or five-year repayment period.

Creditors Could Be Exempt From the Automatic Stay

When you file for bankruptcy, an automatic stay is triggered. Except in limited circumstances, the automatic stay prohibits creditors from initiating or continuing collection activities (such as foreclosure or repossession) without first obtaining permission from the bankruptcy court. Due to the fact that the majority of your creditors will be paid through the Chapter 13 plan, they may seek relief from the automatic stay (permission to resume collection activities) if you fall behind on your plan payments. The request is made through the filing of a motion to lift the stay.

You Might Have Your Chapter 13 Bankruptcy Dismissed

Even if the court has already confirmed your case, you run the risk of having your case dismissed if you fall behind on your Chapter 13 payments. The bankruptcy trustee will petition the court to dismiss your case for failure to adhere to repayment plan requirements, and if granted, the court will dismiss your case without granting you a discharge of your debts (qualifying debts will remain unaffected).

What Are Your Chances of Avoiding Bankruptcy?

Financial difficulties during the Chapter 13 process are not uncommon. Even if you fall behind on your Chapter 13 payments, your case will not be automatically dismissed. You will still have options for resolving your bankruptcy and regaining possession of your property.

Eliminate Your Default

Even if the Chapter 13 trustee requests that your case be dismissed, you may still petition the court for additional time to cure (catch up on) your default. This is the simplest option if you missed a few payments due to an emergency but are now back on track and ready to begin repaying your debts. The majority of trustees and judges will grant you additional time if you demonstrate that you are capable of making up for missed payments.

Make Changes to Your Chapter 13 Plan

If your circumstances have changed since you filed bankruptcy (for example, if your income has decreased as a result of a layoff), you may petition the court to modify your plan and lower your monthly payments. This, however, may not be possible if the plan is solely used to pay priority debts and secured debts on property you do not wish to surrender. Due to the fact that these debts must be paid in full, the court will be unable to reduce your Chapter 13 plan payments.

Restore Your Bankruptcy Under Chapter 13

Even if the bankruptcy is dismissed by the court, you may be able to reinstate your case. However, you will typically be required to do so immediately following your dismissal, and you will be required to bring your plan payments current.

Convert to Chapter 7 or Obtain an Accelerated Discharge

Additionally, you may be able to convert your Chapter 13 bankruptcy to a Chapter 7 (in which case you will receive a discharge without making any plan payments). To do so, you must demonstrate that you qualify for a Chapter 7 bankruptcy because you are no longer able to afford a Chapter 13. However, keep in mind that Chapter 7 bankruptcy does not allow you to discharge priority debts or cure arrearages, so converting may not be in your best interest.

Similarly, you may file for a Chapter 13 hardship discharge early. You would, however, be subject to the same restrictions as Chapter 7.

Represent Yourself in a Chapter 13 Bankruptcy

In the majority of cases, you can immediately re-file a Chapter 13 bankruptcy following dismissal. However, you may be prohibited from refiling for six months if you violated court orders or voluntarily dismissed your prior case, particularly if a creditor obtains relief from the stay. These types of filing prohibitions occur when the court “with prejudice” dismisses your case. Additionally, if you file a subsequent bankruptcy within a year of your previous one, the automatic stay will be limited to 30 days, and you will need to petition the court to extend it.