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Bankruptcy Law: Basic Concepts

What is a bankruptcy plan of reorganization?

The plan of reorganization is a document that sets out how a debtor ­in ­possession will repay creditors. The plan divides creditors into classes. It specifies the treatment of claims for each class of creditor and provides a means for the plan`s implementation. The debtor­in­possession has the exclusive right to file a plan for up to 120 days after the filing of the petition. After this exclusivity period has expired, creditors may file a plan.

After I File For Bankruptcy, Will My Creditors Still Be Able To Call Me?

Yes. When filing for bankruptcy the “automatic stay” prohibits creditors from trying to collect on debts.  These efforts include being prohibited from contacting you in order to collect the debt.  When you hire an attorney, any communication from a creditor is usually required to be made through your attorney.

Can an employer discriminate against me for filing for bankruptcy?

Generally, government and private employers may not discriminate against you for filing bankruptcy. Federal law prohibits private employers from discriminating with respect to employment if the discrimination is solely based on the bankruptcy filing.

What are bankruptcy exemptions?

There are certain types of property that are protected (or exempt) from bankruptcy proceedings. It’s vital to know what will be liquidated and what property is protected/exempted. 

11 U.S.C. 522(b) allows an individual debtor to exempt real, personal, or intangible property from the property of the estate. State law protects exempt assets from distribution to your creditors.

Typically, exempt assets include vehicles up to a certain dollar amount, the equity in your home up to a certain amount, and tools of the trade. Exemptions are claimed on Schedule C. As with all schedules, it is important to fully complete and provide all the information requested. If no one objects to the exemptions you have listed within the time frame specified by the bankruptcy court, these assets will not be a part of your bankruptcy estate and will not be used to pay creditors through your bankruptcy case.

Deciding which assets are exempt and how and if you can protect these assets from your creditors can be one of the more important and difficult aspects of your bankruptcy case. It is extremely important to consult an attorney if you have any questions regarding the issue of exempt assets.

Do I have tell my landlord that I have filed for bankruptcy?

No. You have no obligation to tell your landlord that you have filed for bankruptcy. However, you may look at your lease to see if it contains any provisions about a tenant filing for bankruptcy, such as being grounds for terminating your lease. Plus, your landlord is likely to become a creditor in your bankruptcy proceedings, so he or she may receive notice of the bankruptcy directly from the court.

If I am being evicted by my landlord, can I stop the eviction by filing for bankruptcy?

Maybe, depending on the stage of your eviction proceedings. If your landlord has already completed eviction proceedings and won a judgment of possession, a last-minute bankruptcy filing will not stop your eviction. On the other hand, if the eviction is not complete, a bankruptcy filing may temporarily delay your eviction proceedings, but is unlikely to stop the proceedings altogether.

Can I be evicted if I file for bankruptcy?

Yes, in some circumstances. While a bankruptcy filing does prevent your landlord from terminating your lease or filing an eviction lawsuit against you, the landlord is likely to be able to get permission from the bankruptcy court to terminate your lease and/or evict you in a relatively short period of time. 

What’s the Bankruptcy Abuse Prevention & Consumer Protection Act of 2005?

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005  (BAPCPA) revised the bankruptcy code for filings after October 17, 2005.  The BAPCPA provisions were revised in order to steer away abusive filings, individuals filing for Chapter 7 bankruptcy and have the debts discharged rather than the Chapter 13 bankruptcy which makes them pay their debt and makes a payment plan.

The BAPCPA act puts a more stringent requirement to qualify for Chapter 7 bankruptcy by examining the individual’s ability to repay their debts. A “means test” was also created to determine whether a debtor filing for bankruptcy would be able to file for Chapter 7 or opt for Chapter 13. The means test essentially compares the debtor’s monthly income to the state’s median income and evaluates the debtor’s disposable income after allowance for secured debt and assumed monthly expenses.  Exceeding the median income and having too much money left over after accounting for living expenses won’t qualify an individual for Chapter 7 bankruptcy.

In addition to the above, the revised provisions also increased the filing fees to the court. To file for a Chapter 7 bankruptcy, the filing fee is $299. A Chapter 13 bankruptcy filing fee is $274.

Does my divorce decree protect me if my ex-spouse has filed for bankruptcy and she has listed me as a co-signer on a Schedule D?

If you are contractually bound with your ex­spouse on a debt, the creditor can require the entire payment of that debt from your share of the community property even though the divorce decree assigns the debt to your ex­spouse. Depending on the terms of your divorce decree, you may be able to have certain support obligations under it determined to be non­dischargeable by the bankruptcy court or in state court. If you find out that your ex­spouse has filed for bankruptcy, you should seek legal advice to find out your possible obligations.

What is a bankruptcy disclosure statement?

The disclosure statement is a document that provides a profile of the corporation, financial information and an overview of the proposed plan of reorganization. This information is useful to creditors in deciding whether to accept or reject the proposed plan of reorganization.

Can a homeowner association lien be avoided in bankruptcy?

For the purposes of Chapter 7 bankruptcy, a homeowner association lien is treated as a secured debt, which means that it will not be erased, unlike other unsecured debts. Therefore, you ultimately will be unable to preserve your home, and the lien will be foreclosed upon. In a Chapter 13 bankruptcy, however, you can include the lien in your repayment plan, which will allow you to pay off the debt secured by the lien and keep the underlying real property.