A Guide to Understanding Your Duties During Bankruptcy

Bankruptcy is a legal process that allows individuals and businesses to get a fresh start when they are overwhelmed by debt. While it offers financial relief, it also comes with a set of responsibilities and obligations that filers must adhere to. This guide aims to provide a comprehensive overview of what you need to understand about your duties during bankruptcy, regardless of whether you are filing for Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 vs. Chapter 13 Bankruptcy

Before delving into the specific duties of bankruptcy, it’s essential to understand the two primary types of personal bankruptcy: Chapter 7 and Chapter 13.

1. Chapter 7 Bankruptcy:
   • This is often referred to as “liquidation bankruptcy.”
   • In a Chapter 7 bankruptcy, most of your unsecured debts are discharged, meaning they are forgiven, and you are no longer responsible for repaying them.
   • Assets that are not exempt may be sold to pay off creditors.
2. Chapter 13 Bankruptcy:
   • This is known as “reorganization bankruptcy.”
   • In a Chapter 13 bankruptcy, you create a repayment plan that lasts three to five years, and you make monthly payments to your creditors.
   • At the end of the repayment plan, the remaining eligible debts are discharged.

Now, let’s delve into the specific duties and responsibilities you’ll encounter when filing for bankruptcy.

1. Disclosure of Financial Information:

One of the primary duties during bankruptcy is to provide a complete and accurate picture of your financial situation. This includes:

• Listing all your assets, such as real estate, vehicles, bank accounts, investments, and personal belongings.
• Detailing your sources of income, including wages, self-employment income, rental income, and any other financial resources.
• Disclosing all your debts, including credit cards, medical bills, mortgages, and loans.

Failing to provide truthful and complete information can lead to legal consequences, including your case being dismissed or even criminal charges in some cases.

2. Attend Credit Counseling:

Both Chapter 7 and Chapter 13 bankruptcy require filers to attend credit counseling. You must complete this requirement from an approved credit counseling agency within 180 days before filing your bankruptcy petition.

3. Automatic Stay Compliance:

When you file for bankruptcy, an automatic stay is issued. This stay prohibits creditors from attempting to collect any debts from you during the bankruptcy process. It is crucial to inform your creditors of your bankruptcy filing to ensure they stop any collection actions.

4. Meeting of Creditors:

In a Chapter 7 bankruptcy, you’ll be required to attend a “meeting of creditors” or a “341 meeting.” This meeting is usually held within a month of filing, and it’s an opportunity for your creditors to ask questions about your financial situation.

5. Follow the Repayment Plan (Chapter 13):

If you’re filing for Chapter 13 bankruptcy, a significant duty is adhering to the court-approved repayment plan. This plan outlines how you’ll pay your debts over the next three to five years. Regular, on-time payments are crucial to the success of your Chapter 13 bankruptcy case.

6. Completion of Financial Management Course:

After your bankruptcy case is filed, you are required to complete a financial management course. This course aims to provide you with essential financial skills and knowledge to help you manage your finances better in the future.

7. Cooperation with the Trustee:

In both Chapter 7 and Chapter 13 bankruptcies, a trustee is appointed to oversee your case. The trustee’s role is to ensure that the bankruptcy process runs smoothly and fairly. You must cooperate with the trustee, provide requested documentation, and attend any required meetings.

8. Debtor Education Course (Chapter 7):

In Chapter 7 bankruptcy, you must also complete a debtor education course. This course is distinct from the credit counseling and aims to help you make informed decisions about managing your finances and debts.

9. Maintain Insurance Coverage (Chapter 13):

If you file for Chapter 13 bankruptcy and have secured debts like a mortgage or car loan, you’ll need to maintain adequate insurance coverage on those assets.

10. Complete Reaffirmation Agreements (Chapter 7):

In some cases, you may need to sign reaffirmation agreements for certain secured debts, such as a car loan. This agreement states that you wish to retain the asset and continue paying the debt after bankruptcy.

11. Await Discharge Order:

Finally, after fulfilling all your bankruptcy obligations, you will receive a discharge order from the court. This order signifies the successful completion of your bankruptcy case, and your eligible debts are forgiven.

Consequences of Non-Compliance:

Failing to meet your bankruptcy duties can have serious consequences. Depending on the severity of the violation, it could lead to:

• Dismissal of your case.
• Non-dischargeability of certain debts.
• Loss of assets.
• Criminal charges for fraud or perjury.

It is crucial to consult with an experienced bankruptcy attorney to navigate the bankruptcy process successfully and to understand your specific obligations based on your unique financial situation.

In Conclusion:

Bankruptcy can be a lifeline for those drowning in debt, offering a fresh financial start. However, it is not a get-out-of-jail-free card. Understanding your duties during bankruptcy is essential to ensure a smooth process and to reap the full benefits of this legal remedy.

It’s also crucial to remember that while bankruptcy offers relief, it can impact your credit score and financial future. Thus, it is advisable to explore other debt management options before filing for bankruptcy and to consult with a knowledgeable attorney to guide you through the process, ensuring you fulfill all your obligations while protecting your financial well-being.