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After you file a bankruptcy case, you are required to attend a meeting of creditors. This is scheduled for about a month after your petition is filed, and is usually the only appearance you will need to make during the bankruptcy process. Your attorney should prepare your bankruptcy petition and schedules with plenty of attention to detail and accuracy. Before you sign your petition, you should carefully review it and correct any items that are incorrect or incomplete. At the meeting of creditors, the bankruptcy trustee will ask you some questions which you will answer under oath. Tell the truth. Listen to the question. Let the trustee finish before you start speaking. Answer in as few words as possible. The trustee will already know much about your financial affairs. Before your scheduled meeting, your attorney sends the trustee several documents. Prior to the meeting the trustee has reviewed your deed, mortgage, vehicle titles, and your most recent tax returns, in addition to your bankruptcy petition and schedules. So when you meet with the trustee, s/he may not have many question for you other than “When you signed your bankruptcy petition and schedules did you review them? And were they true and accurate? Were there any errors or omissions?” You may be asked if you had sold any property in the last few years, or how much of a tax refund you expect to get. The trustee could ask if you have suffered any injuries that you could sue someone for, or if you expect to receive an inheritance. The trustee will also discuss with you what will happen to any property you own that is not protected by an exemption. The meeting of creditors often takes less than ½ hour.

This is NOT true. In fact, nothing could be further from the truth. The minute you file bankruptcy, the Bankruptcy Court issues an order telling all of your creditors to leave you alone. No more phone calls. No more collection letters. No more lawsuits. No garnishments. No repossessions. No foreclosures. Nothing. No actions whatsoever against you or your assets. This order has a name. It is called the “Automatic Stay,” and it is issued pursuant to Title 11 of the United States Code, Section 362. The Automatic Stay prohibits your creditors from taking any action that could be considered an attempt to collect a debt form you or your assets. Once you file bankruptcy, the creditor is not even allowed to call you or send you letters. In addition, the creditor must stop any collection attempts already started. The Automatic Stay is very powerful, and puts the full weight of the United States Courts to work for you, to make sure your creditors leave you and your assets alone. If a creditor violates the Automatic Stay, you have the right to bring the creditor before the Court for Contempt of Court, and to be compensated accordingly. This is not a hollow right. Bankruptcy Court Judges do not take kindly to creditors who ignore their Order-the Automatic Stay-and these Judges have been known to punish creditors severely. Very simply, once you file for bankruptcy, creditors must leave you alone or suffer the consequences.

There exists something referred to as the “wild card” exemption. This is a very useful exemption and what allows most bankruptcy debtors to keep all their property. Section 522(d) of the Bankruptcy Code states, in relevant part: The following property may be exempted […] (1) The debtor’s aggregate interest, not to exceed $22,975 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor. [….] (5) The debtor’s aggregate interest in any property, not to exceed in value $1,225 plus up to $11,500 of any unused amount of the exemption provided under paragraph (1) of this subsection. Subsection (5) is the wild card exemption. These two subsections work together to allow the debtor who doesn’t use the so-called federal homestead to exempt almost $13,000 in “any property”. This, coupled with the other asset-specific exemptions found elsewhere in Section 522, usually allows a debtor to exempt all his property in bankruptcy.

There are two main federal bankruptcy exemptions for “unmatured” insurance contracts; 11 U.S.C. § 522(d)(7) and (d)(8): (7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract. (8) The debtor’s aggregate interest, not to exceed in value $11,525 less any amount of property of the estate transferred in the manner specified in section 542(d) of this title, in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent. So, what’s the bottom line of these exemptions? First, an unmatured life insurance contract is one in which the insured person hasn’t died yet. These insurance exemptions have at times provoked controversy, but the gist is that subsection 7 protects the basic insurance contract, i.e. the right to receive proceeds on the death of the insured. Consequently, it is a good idea to claim an exemption in any term life policy under this subsection so that if the insured dies within a period which would give the bankruptcy estate an interest in the proceeds-for example, in the 180 days after the filing of the petition-these proceeds would be exempted without need to resort to the alternative exemption for life insurance proceeds under subsection 11 of Section 522 (which includes a reasonableness cap). Similarly, the basic insurance contract of a whole life situation should also be exempted with subsection 7, but since a whole life policy has an additional facet to them, a savings or cash surrender value, this additional value is addressed in subsection 8. Subsection 8 provides an exemption for this cash value but a monetary cap of the amount that can be exempted in bankruptcy. It is important to note that, depending on the other property of the debtor, it may be possible to exempt additional value under the “wildcard” exemption, but the current $12,250 is the only insurance-specific exemption for whole life cash value.

Bankruptcy’s automatic stay stops most lawsuits once the bankruptcy is filed. Typically, you will not be able to file a lawsuit if it relates to certain debts which include: personal loans, credit card balances, medical bills, utility bills, unpaid rent, unpaid car payments, home foreclosures or accidental personal injury cases. There are some instances where the lawsuit can continue despite a bankruptcy being filed. For example, filing bankruptcy will not stop a criminal case. Divorce and custody cases are not directly affected by the filing of a bankruptcy. If the person filing for bankruptcy caused a death or injury while intoxicated, the lawsuit against them can usually continue. Also, lawsuits where debts arise after the filing of bankruptcy can continue. Meaning if the debtor causes an accident one month after filing bankruptcy and damages your car, you can file a lawsuit against them. For matters arising before the bankruptcy was filed, you may be able to petition the bankruptcy court for relief from the automatic stay so that your lawsuit may continue. Whether the court would grant your request depends on the circumstances.   About Michael A. Cibik, Esq. Michael A. Cibik is a partner at the Philadelphia law firm of Cibik Law, P.C. He is one of the few attorneys in the Philadelphia area certified by the American Bankruptcy Board.

Every year, thousands of Americans file for bankruptcy to achieve a fresh start with their finances. If you have little income and significant debt, you could be eligible for a Chapter 7 bankruptcy. At the end of a Chapter 7 bankruptcy, the bankruptcy court will effectively eliminate most of your unsecured debts. Not everyone qualifies for a Chapter 7 bankruptcy, however. Those who do not qualify for a Chapter 7 bankruptcy can apply for a Chapter 13 bankruptcy.  When we meet with clients, they often ask us if the bankruptcy court will deny their bankruptcy. It depends on whether the applicants meet the eligibility requirements for the particular type of bankruptcy they are filing. If you do meet the eligibility requirements, there are various other reasons why the bankruptcy court could deny your bankruptcy application, including the following:   Attempting to Defraud a Creditor Engaging in any type of fraud can cause a denial of your bankruptcy application. If you defraud, hinder, or delay one of your creditors, the bankruptcy court will deny your application. Defrauding a creditor can include removing, destroying, or transferring property within a year before filing your bankruptcy application. If you engage in fraud at any time after you file your application, your application can be denied. Bankruptcy courts want to prohibit applicants from giving away their assets to protect their assets from bankruptcy. Suppose someone is worried about giving up their sports car, so they give their sports car away to their adult child before they file for bankruptcy. This type of action could be considered defrauding a creditor.  When you apply for bankruptcy, you must disclose all of your debts to your attorney immediately. You should also tell your attorney about any potential fraudulent behavior, so your attorney can prepare for questions about the matter from the trustee. It is possible that you can explain your loss of asset to the trustee, and the trustee may understand. It is also possible the trustee will deny your bankruptcy.   Making False Statements  Similarly, if you can steal important information regarding your financial condition, the bankruptcy court could deny your Chapter 7 or Chapter 13 bankruptcy. Likewise, if you make false statements in connection with your bankruptcy, your bankruptcy may be denied. Remember that you are stating under oath that everything in your application is true when you submit your bankruptcy application. If the court finds out that you lied or left information out, one of your creditors can challenge your bankruptcy discharge.   Violating a Court Order Violating a court order is a quick way to have your bankruptcy denied. The bankruptcy court may order you to submit more information about your bank accounts or assets. You must comply with these court orders, even if you do not think they are fair or necessary. Failure to comply with court orders will almost certainly result in the courts not discharging your debt through bankruptcy.   Failure to Disclose a Prior Bankruptcy Case Sometimes applicants for bankruptcy assume that they will be denied if they tell the court that they have already had a bankruptcy in the past. As a result, they hide their previous bankruptcy and don’t disclose it to the court on their application. Failure to disclose your prior bankruptcy case well typically results in a denial of your application. It is essential that you are truthful and upfront about any other bankruptcy cases in your past.   Failure to Complete Your Required Financial Courses Bankruptcy law requires that all applicants complete a credit counseling course. Applicants must complete this course before they file their application. They must also complete a debt management course before the court finalizes the discharge of their debt. After you pay for and finish each course, you will receive a certificate of completion. Your attorney can help you file the certificate with the court. If you do not take the class or fail to file your certificate on time, the bankruptcy court will dismiss your case.   Paying Your Court Filing Fees In addition to completing the mandatory classes, you will need to pay all of your filing fees. If you have little to no income in your filing for a Chapter 7 bankruptcy, you can apply for a waiver of all of your court fees. The court will consider your expenses and your current income when deciding whether to grant or deny the waiver of fees. However, if you do not obtain a waiver and do not pay your fees, the court will dismiss your case.   Not Attending Required Meetings Bankruptcy applicants must attend a mandatory hearing known as the meeting of creditors. During this hearing, the bankruptcy trustee in charge of your case will ask you questions while you are under oath. They will ask about your financial affairs and bankruptcy papers. You also need to present them with proof of your identity. Typically, the meeting of creditors only lasts for 15 to 30 minutes. Creditors rarely show up. Nonetheless, if you do not attend your meeting of creditors, the trustee will typically ask the court to dismiss your case.   Not Submitting Required Documents or Making Payments When you file for bankruptcy, you must disclose all of your financial affairs to the court. You will need to fill out a set of bankruptcy forms, including schedules, bankruptcy petitions, and other required forms. You will also be required to submit supporting documents like your pay stubs, tax returns, and other documents that verify the information you have written down in your application. Failure to provide all the required documentation will result in a denial of your bankruptcy.