Bankruptcy Basics

Basic Information Pertaining to Bankruptcy

If you are reading this, then you are probably contemplating filing bankruptcy. But what does it mean to file bankruptcy? Bankruptcy filing can be generally defined as the legal process thorough which individuals or businesses who are in financial trouble are able to work out their debts or discharge them under the protection of the U.S. Bankruptcy Court, a Federal Court.

Even though bankruptcy falls under Federal Law, there are legal differences from State to State.

The United States Constitution at Article I, Section 8, authorizes Congress to enact bankruptcy laws. Congress has done so and Title 11 of the U.S. Code is the uniform law governing bankruptcies in the United States. Nevertheless, exemption law, contract law, local court rules, and other legal matters will make bankruptcy law vary somewhat from jurisdiction to jurisdiction. The information on this website is focused on Bankruptcy Relief in Ohio, but people who live in other jurisdictions might find the general information and concepts useful.

The Goal of Bankruptcy—A Fresh Start

A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:

[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt. Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934).

This goal is accomplished through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts.

Bankruptcy Chapters Available

For individuals or married couples considering a bankruptcy filing, there are basically two chapters of the Bankruptcy Code available to them: Chapter 7 and Chapter 13. In rare cases, Chapter 11 may also be appropriate for an individual debtor, but these situations do not occur often so the focus should be primarily on Chapter 7 and Chapter 13. Please follow the links here or at the right for more information on these chapters.

Our Procedure for Bankruptcy Filings

Generally, when an individual or married couple contacts us for bankruptcy counseling, we will have an initial meeting, either in person or by video conference (depending upon availability and urgency) at which we will gather basic information about the client’s situation and we will advise the client of the various bankruptcy options and of the particular laws that apply to his or her individual case.

If the client chooses to go forward with bankruptcy, then we will gather certain information and documentation from the client necessary to do prepare the bankruptcy petition. We will also pull a credit report on the client so that we can ensure that all debts are listed in the bankruptcy.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) went into effect in October 2005. It overhauled bankruptcy law and made many changes to it. One of these important changes is that the Debtor now needs to pass a certain test, called the means test before he or she can even file bankruptcy. This means test determines which Chapter a debtor may file under. We will run the means test and advise the client of the results which will determine how we proceed. Generally, we can run a quick version of this test at the first meeting which will not be definitive but will give us a good idea how we are going to proceed.

Prior to filing bankruptcy, an individual debtor or joint debtors (as opposed to a business debtor) will need to complete a debtor education course, also mandated by the BAPCPA. This course has to be completed prior to the actual bankruptcy filing with the court. The course is given by a non-profit organization authorized by the Bankruptcy Court to give such courses. These can be done over the internet or over the telephone and do no require the debtors to travel to take a class.

Once we have completed the Bankruptcy Petition and the clients have completed the education course, we will have them back in the office to review and sign the Bankruptcy Petition. This review will be done with the attorney and any changes that need to be made to the petition will be made at this time.

After the petition is correct and printed, the attorney and clients will sign the petition and one of the staff members will upload this petition electronically and file it with the appropriate Bankruptcy Court. We will give you a copy of the Bankruptcy Petition as-filed, along with a certificate showing the date and time of the filing and a letter with the date and time of your hearing and a map to the hearing location.

Each person or business filing bankruptcy is required to attend a meeting of creditors conducted by the U.S. Bankruptcy Trustee assigned to the case. This hearing is an opportunity for the Trustee to ask questions of the debtor to verify information in the debtors’ Petition and also an opportunity for creditors to ask similar questions. However, creditors rarely ever attend these meetings.

Following the meeting of creditors, debtors will need to take a second debtor education course. If this is properly completed, the discharge will issue at the completion of the payments in a Chapter 13 case or in about 60 days from the date of the meeting of creditors in a Chapter 7 case.

The Date of Filing is Important

The date of filing is a very important date on the calendar of any filer, because it has many implications. One of the most important is that all dischargeable debts incurred prior to this date can be discharged in the bankruptcy. Most debts incurred after this date may not be.

The Discharge

The bankruptcy discharge relieves the debtor of any legal obligation to pay dischargeable debts other than those specifically reaffirmed in the bankruptcy process. This is the fresh start that the Court discussed in Local Loan Co. v. Hunt, above.

Why do you need us?

As you can see from the above explanation of the process (which in all honesty is an oversimplification), bankruptcy is lengthy and complicated. Attempting to file your own bankruptcy is not too different from attempting to perform surgery on yourself. The results may be disastrous. Practice makes perfect, right? This is why you should want an attorney who has filed thousands of cases prior to yours and has learned the ins and outs of bankruptcy practice along the way. There are many questions that need to be answered at each step of the bankruptcy process, having an experienced bankruptcy attorney by your side, ensures that you are reaching the right answers and following the right path.

How do you know if bankruptcy is right for you, and who can guide you through this complicated process? Hiring a competent bankruptcy attorney can answer these and many more complex questions for you. Although it is not mandatory to hire an attorney to file bankruptcy, it is a much more prudent choice. An experienced bankruptcy attorney who has handled thousands of cases can help you protect the maximum allowed amount of assets and can guide you through this complex procedure and help you emerge on the other side with fewer debts and fewer worries.

When you choose us as your bankruptcy firm, you will be consulted by the attorney himself the whole way and not just his staff. He will get to know you personally and will give you the best individually tailored advice that you deserve. Although, we practice in other areas, bankruptcy has always been the most rewarding to us, because we feel we are playing a small part in the rebuilding of many good American families who have suffered from financial misfortune.

As with many things, the earlier you engage the services of a competent professional, the better the result will be. Pre-bankruptcy planning is essential to properly protect exempt assets and avoid preference actions and adversarial proceedings.

Please let us help you get back on the road of financial well-being like we have done for many before you.