A Little Bankruptcy History

The United States Court System provides some excellent information on the bankruptcy process in the United States. From the Courts’ Website:

Article I, Section 8, of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies.” Under this grant of authority, Congress enacted the “Bankruptcy Code” in 1978. The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases.

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country. The bankruptcy courts generally have their own clerk’s offices.

The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts. Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case.

A debtor’s involvement with the bankruptcy judge is usually very limited. A typical chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection is raised in the case. A chapter 13 debtor may only have to appear before the bankruptcy judge at a plan confirmation hearing. Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which is usually held at the offices of the U.S. trustee. This meeting is informally called a “341 meeting” because section 341 of the Bankruptcy Code requires that the debtor attend this meeting so that creditors can question the debtor about debts and property.

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. This publication describes the bankruptcy discharge in a question and answer format, discussing the timing of the discharge, the scope of the discharge (what debts are discharged and what debts are not discharged), objections to discharge, and revocation of the discharge. It also describes what a debtor can do if a creditor attempts to collect a discharged debt after the bankruptcy case is concluded.

Six basic types of bankruptcy cases are provided for under the Bankruptcy Code, each of which is discussed in this publication. The cases are traditionally given the names of the chapters that describe them.

Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a “means test” to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor’s income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.

Chapter 9, entitled Adjustment of Debts of a Municipality, provides essentially for reorganization, much like a reorganization under chapter 11. Only a “municipality” may file under chapter 9, which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts.

Chapter 11, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.

Chapter 12, entitled Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income, provides debt relief to family farmers and fishermen with regular income. The process under chapter 12 is very similar to that of chapter 13, under which the debtor proposes a plan to repay debts over a period of time – no more than three years unless the court approves a longer period, not exceeding five years. There is also a trustee in every chapter 12 case whose duties are very similar to those of a chapter 13 trustee. The chapter 12 trustee’s disbursement of payments to creditors under a confirmed plan parallels the procedure under chapter 13. Chapter 12 allows a family farmer or fisherman to continue to operate the business while the plan is being carried out.

Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor’s repayment plan, depending on whether it meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.

The purpose of Chapter 15, entitled Ancillary and Other Cross-Border Cases, is to provide an effective mechanism for dealing with cases of cross-border insolvency. This publication discusses the applicability of Chapter 15 where a debtor or its property is subject to the laws of the United States and one or more foreign countries.

In addition to the basic types of bankruptcy cases, Bankruptcy Basics provides an overview of the Servicemembers’ Civil Relief Act, which, among other things, provides protection to members of the military against the entry of default judgments and gives the court the ability to stay proceedings against military debtors.

This publication also contains a description of liquidation proceedings under the Securities Investor Protection Act (“SIPA”). Although the Bankruptcy Code provides for a stockbroker liquidation proceeding, it is far more likely that a failing brokerage firm will find itself involved in a SIPA proceeding. The purpose of SIPA is to return to investors securities and cash left with failed brokerages. Since being established by Congress in 1970, the Securities Investor Protection Corporation has protected investors who deposit stocks and bonds with brokerage firms by ensuring that every customer’s property is protected, up to $500,000 per customer.

The bankruptcy process is complex and relies on legal concepts like the “automatic stay,” “discharge,” “exemptions,” and “assume.” Therefore, the final chapter of this publication is a glossary of Bankruptcy Terminology which explains, in layman’s terms, most of the legal concepts that apply in cases filed under the Bankruptcy Code.

Hours For The United States Bankruptcy Court Eastern District of Michigan

In general, the office of the Court clerk is open from 8:30 a.m. until 4:00 p.m. Monday through Friday.

Excepting petitions filed pursuant to 11 U.S.C. article 304, petitions, both voluntary and involuntary, must be filed at the court location for the county in which the domicile, residence, principal place of business, or principal assets of the person or entity that is the subject of such case have been located for the 180 days immediately preceding such commencement, or for a longer portion of such 180- days period than the domicile, residence, principal place of business, or principal assets of such person were located in any other court location; provided however, a petition may be filed at the court location where a companion case was filed.

Here are the locations provided by the Court.

How a Personal Injury Lawsuit Impacts Bankruptcy

The following is a guest post from the Chicago attorneys at Dolan Law Offices:

If you are simultaneously a defendant in a personal injury lawsuit and a bankruptcy petitioner then you have a lot to think about and a lot of decisions to make that can impact your net worth and your future.  For the most part, your personal injury case will proceed in trial court and your bankruptcy case will proceed in Bankruptcy Court.  However, your personal injury case will be considered an unliquidated claim in your bankruptcy case and, therefore, impact your bankruptcy settlement.

How Will my Personal Injury Case be Valued?

The value of an unliquidated claim, such as a pending personal injury lawsuit, must be determined by the Bankruptcy Court.  Bankruptcy Courts have discretion in determining the value of potential personal injury damages and it is, therefore, advisable to have your bankruptcy lawyer and personal injury attorney communicate with one another and provide an estimated value, and the reasons for it, to the Bankruptcy Court.  In most cases the value of your potential liability in a personal injury case will be determined without live testimony and will be determined according to the information provided by your lawyer.  Therefore, it is critical that this important information be complete when it is filed with the Bankruptcy Court.

The Chicago attorneys of Dolan Law Offices represent clients in Illinois personal injury cases.

How Do I Determine Whether To Hire A Bankruptcy Lawyer Or File On My Own?

How Do I Determine Whether To Hire A Bankruptcy Lawyer Or File On My Own?

On any given day, we talk to a lot of different Michigan residents about their individual Bankruptcy questions. During these conversations, people frequently ask if whether or not it’s a good idea to file bankruptcy on their own. You may be thinking to yourself, well obviously a bankruptcy lawyer is going to tell me I need a lawyer to file for bankruptcy. Like many other areas of law, deciding to handle your bankruptcy legal matter on your own, is simply not a good decision. Bankruptcy is very complicated. One small mistake can end up costing you much more than the fee you pay to your Michigan bankruptcy legal professional.. Even worse, making repeated mistakes on your filings may subject you to significant penalties and delays.

Hiring A Michigan Bankruptcy Lawyer May Actually Be Cheaper Than Handling Your Situation On Your Own

If you don’t don’t believe us, call us. You don’t have to search very hard to find a bad bankruptcy story. We’re happy to lay out all your options and explain to you which directoin we believe is the best for you specific situation. We understand that each of our clients’ needs is different. One size fits all, do it yourself-style bankruptcy may end up costing you more than hiring an experienced bankruptcy attorney.

There Are Certain Things That A Bankruptcy Lawyer Can Help You With That You Simply Can’t Handle On Your Own

When you are looking for a lawyer for your bankruptcy legal matter, make sure you are talking to attorneys that have experience handling bankruptcies in your state. There are aspects to filing for bankruptcy that a local bankruptcy attorney may be familiar with that one from another state may not. If you’re facing serious debt issues, usually the best thing to do is to talk with a bankruptcy lawyer near you about all the different options that are available to you.

What Is Bankruptcy And How Can It Help Me?

Bankruptcy is a legal proceeding in which a person who can not pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.

Bankruptcy can help you in a variety of ways. Should you be behind on a car payment or house payment, filing a Chapter 13 bankruptcy case will stop your creditors from foreclosing on your house or repossessing your car and allow you reorganize your debts to pay your ongoing monthly payments along with past due arrears. In many cases, we may be able to cram-down your car payments to the current value of your vehicle and/or “strip” a second mortgage on your home. A Chapter 7 filing can clear you of all your general unsecured debts and help you get a fresh start on life

Is Bankruptcy Immoral?

Bankruptcy is NOT immoral!! It’s in the Bible – Deuteronomy 15.1: “In the 7th year, each creditor shall release his debtors. This shall be known as The Lord’s Release.” Filing bankruptcy isn’t immoral. Creditors just want you to think that way. Banks and credit card companies are ripping us all off. So don’t fee that bankruptcy is immoral.

The banks and credit card companies are immoral. As soon as you are late on a payment, these companies will hike up your interest rates to an unbelievable and usury interest rate! Banks that are receiving BILLIONS in government bailouts are not willing to work with people to refinance/modify their loans! They will make you run through several hoops and many times intentionally attempt to frustrate you in this process! Even when they do allow it, this process can take up to 6 months to complete!

Will Anyone Find Out if I File?

Although the filing of a bankruptcy petition is public record, this information is not easily accessible to the average person. Bankruptcy filing is done electronically, so you would need access to this electronic system to find that information. It is no more of a public record than any lawsuit brought by one of your creditors. Your friends/family will NOT be notified of your filing if they are not one of your creditors.

Do I Tell My Creditors I’m Filing Bankruptcy When They Call Me?

No. The only creditors you should tell about your pending bankruptcy are close family members, friends, your landlord, and possibly your mortgage company if you intend on keeping your house. These are relationships you will want going on in the future, so you may discuss the pending bankruptcy with them.

All other creditors, the best advice is to simply not talk to them. If you tell them you have hired us for bankruptcy, they will either sue you immediately to get whatever they can or start calling our office for your private information. We keep all of your information confidential until the time of filing; we will not give them any of your information, so they cannot process your case as going into bankruptcy.

How Do I Stop My Creditors from Calling Between Now and the Time I File My Bankruptcy?

If they are calling your work, tell them directly, “My employer prohibits all calls to employees while at work.” According to the Fair Debt Collection Practices Act (FDCPA) § 805(a)(3), they must immediately stop.

To stop calls at home, simply write your creditor a letter that says:

I, __(your name) __, of __(your address goes here)__, demand you, creditor __(creditor name and all collection agencies it employs)__, to cease all further communication with me. This demand is made pursuant to the Federal Debt Collection Practices Act § 805(c). If you fail to comply with my demand, I may seek the counsel of an attorney to bring an action against you under FDCPA § 813.

Under FDCPA § 805(c) they must cease communications with you.

Keep in mind, just because they have stopped calling, it doesn’t mean they won’t immediately file a lawsuit against you. The best way to stop ALL collection attempts is through filing bankruptcy.