By Ryan C. Wood
For most bankruptcy filers the most important thing that happens is after declaring bankruptcy and filing your petition is the automatic stay takes effect stopping all debt collection activity such as lawsuits, foreclosures, repossessions, wage garnishment, phone calls, letters, and other forms of debt collection. The automatic stay stops everything, possibly temporarily as to certain creditors, so you can get some relief from your creditors collection activity and discharge or reorganize debts as the Bankruptcy Code provides. The automatic stay is the backbone of bankruptcy and the greatest grant of power to the Bankruptcy Court. The automatic stay must be cherished, respected, and not abused. The Bankruptcy Code provides by law the gift of time to stop collection activity that under your state law is perfectly legal and right. Our Federal Bankruptcy Code flips the script and provides rights and responsibilities to creditors according to the Bankruptcy Code. What happens is you continue to pay your normal living expenses that are reasonable and necessary and not more payments on the no longer manageable debts you are seeking to discharge or reorganize.
Since 2005, there are two courses that must be completed with declaring bankruptcy. You must complete the first course prior to the bankruptcy petition being reviewed, signed and filed with the Bankruptcy Court. A certificate of completion is issued, and the certificate of completion is filed with the initial bankruptcy petition for relief. After the case is filed there is a second required course that must be completed. Again, a certificate of completion is issued and filed with the Court. The good news is both of these courses are now relatively inexpensive and are available to complete on the internet.
Of course, a bankruptcy petition must be prepared and filed listing your income, expenses, assets, and financial transactions leading up to the bankruptcy filing. Different bankruptcy attorneys have varying processes to obtain the information they need to draft the bankruptcy petition. This will vary depending upon the complexity of your case and the nature of your assets and debts. Fees will also vary widely from attorney to attorney for all kinds of reasons. You should speak with no less than two attorneys before retaining an attorney.
It is recommended that you retain an experienced bankruptcy attorney in your federal district. While one plus one may equal two in almost ever area of the world, in the bankruptcy world, one plus one may equal five by judicial interpretation. You can never really know. While Bankruptcy Courts have Section 105(a) to, “issue any order, process, or judgment that is necessary or appropriate to carry out [its] provisions,” this provision has unfortunately been used to rewrite the actual Bankruptcy Code creating results never intended by Congress or allowable under the black letter law of the Bankruptcy Code. It is like the Necessary and Proper Clause of the United States Constitution being used arguably to allow legislation outside of the confines of the black letter law of the United States Constitution. Bankruptcy nevertheless is a good thing, or no one would ever choose to seek bankruptcy protection. The bankruptcy deal will always beat the real world.
Once the petition is filed, whether the petition is for relief under Chapter 7 (liquidation of not protected assets), Chapter 11 (reorganization for large debt amounts), Chapter 12 (reorganization for family farmers and fishermen), or Chapter 13 (reorganization for smaller amounts of debt for individuals) of the Bankruptcy Code, a meeting of the creditors will be schedule and a notice mailed to regarding how to appear for the meeting. The meeting will be held about 30-days after the petition is filed and the meeting is administered by the trustee assigned to the case. Prior to COVID the meetings were held at your divisional federal courthouse. Due to COVID the trustee assigned to the case chooses with Zoom video conference or by telephone conference. The top of page two of the meeting of the creditors notice will provide how to appear for the meeting. In Chapter 7 there are a panel of trustee’s that get assigned cases as the cases are filed. In Chapter 11 the United State Trustee’s Office will administer the meeting of creditors unless a separate trustee is appointed like in a Chapter 7 case. In Chapter 13 there are standing Chapter 13 Trustees that have a monopoly in geographic regions within the District Court. The standing Chapter 13 Trustee in your region is assigned all Chapter 13 cases that are filed within that region and will administer the Chapter 13 case and meeting of creditors. We will not get into how monopolies are supposed to be illegal as against the public policy.
Before the meeting of creditors is held various documents by law must be provided to the trustee. These include recent filed tax returns and pay statements. These are the only mandatory by law documents that must be turned over prior to the meeting. You have a duty to cooperate with the trustee assigned to your case. Generally, even if requested documents are not mandatory normally the requested documents will be provided regardless due to the duty to cooperate. Also, if the trustee filed a Rule 2004 Examination to have the Bankruptcy Court order you to provide the same documents the Bankruptcy Court would most likely order turnover of the documents. Why waste time and money fighting the turnover of documents then? Also, if you are truthful and honest there should never be a problem with turning over requested documents if you have the documents or it is not burdensome to obtain the documents. From time-to-time overzealous Chapter 7 Trustee’s may request certain documents that make no sense and seem burdensome to provide. Talk to the Chapter 7 Truste about it.
Now that all documents are provided you must attend the meeting of creditors. Your bankruptcy attorney will appear with you and discuss the meeting prior. Hopefully your attorney does not discuss your case in front of all the other attorneys and their clients waiting for their meeting of creditors. It unfortunately happens. There is a bankruptcy information sheet you must review too. It is called the meeting of the creditors given creditors may appear and ask you questions about your income, expenses, assets and debts, or ability to pay your debts. It is a limited forum and creditors are not given much time to ask questions unless the Chapter 7 Trustee is interested in the line of questioning. A Chapter 7 Trustee will be interested in the creditor questions if it appears the creditor is pointing out problems with the petition or information that is not accurate. The Chapter 7 Trustee will be even more interested if it appears there are assets available to be liquidated for the benefit of creditors. This is because this is how Chapter 7 Trustees are paid. For meeting it hopefully should be simple given all you really need to do is tell the truth. It should be that simple, go smoothly, and the meeting will be concluded.
In a Chapter 7 bankruptcy case the conclusion of the meeting of creditors is a great thing and a big deal. The earliest the Bankruptcy Court can enter your order of discharge is 60 days after the meeting of the creditors. If your meeting of creditors is scheduled for March 20, 2022, then procedurally the earliest the Bankruptcy Court can enter your order of discharge is around May 20, 2022.
In reorganization cases under Chapter 11, Chapter 12, or Chapter 13 the plan of reorganization will still need to be confirmed/approved by the Bankruptcy Court. In a perfect world, and after the conclusion of the meeting of the creditors, one hopes to confirm the plan within a month of two. This again will depend upon the complexity of your case and the types of debt you are seeking to reorganize. In many reorganization cases the plan may not be confirmed for up to a year to resolve issues with creditors or meet the requirements for the plan of reorganization to be confirmed/approved by the Bankruptcy Court.
This is what generally happens when you declare bankruptcy in a typical bankruptcy case. More and more atypical facts present themselves these days making cases much more expensive and unclear as to results the Bankruptcy Code is supposed to provide, relief from not manageable debt.
