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The Bankruptcy Code is designed to provide an economic fresh start to individuals and families who are unable to pay their debts.  Additionally, the Bankruptcy Code ensures that all creditors are treated equally.  The decision to seek bankruptcy protection is often a difficult one and most consumers benefit from carefully considering their options with a qualified attorney.

In order to obtain protection from creditors through bankruptcy you must file a petition, listing everything you own and everyone you owe money to, with the Federal Bankruptcy Court.  Upon the filing of a bankruptcy petition a stay issued by the Court prevents creditors from lawfully attempting to collect the debts listed in the bankruptcy petition.  Preparing and filing a bankruptcy petition properly is both challenging and complicated.  Consumers attempting to file bankruptcy are encouraged to seek the assistance of a qualified attorney to assist them.  Failure to properly file the petition or failing to comply with other pre-filing requirements, such as credit counseling, can result in the bankruptcy being dismissed and even a bar on re-filing for a period of time.

There are four types of bankruptcies available to individuals: Chapter 7 liquidation, Chapter 11 reorganization, a Chapter 12 adjustment of debts for family farmers or fishermen, and a Chapter 13 adjustment of debts.  It is important that a debtor carefully consider the appropriate type of bankruptcy for their particular circumstances.  Some consumer debtors, due to having a higher than average income, are not eligible for relief under Chapter 7.  Additionally, in some instances, such as where a debtor is seeking protection from a mortgage foreclosure, a Chapter 13 bankruptcy may be more appropriate.  The vast majority of consumer bankruptcies are filed under either Chapter 7 or Chapter 13.

Individuals and families seeking bankruptcy have a number of exemptions available which should allow them to protect personal property from their creditors.  For example, retirement savings are often exempt from creditor’s claims.  Home equity is usually protected by Florida’s Homestead Act.  The Bankruptcy Code is designed to ensure that debtors have reasonable assets left with which to achieve their economic fresh start.

There are some types of debts which are often not dischargeable in bankruptcy.  Tax obligations, student loan debt, domestic support obligations, and criminal fines are generally not dischargeable in bankruptcy.  However, it is important that these types of obligations be carefully reviewed with a qualified attorney to fully determine their exact nature and whether or not they are dischargeable, or, if the debtor is eligible, for a hardship discharge of an otherwise non-dischargeable debt.  Additionally, if a debt were incurred through fraudulent means by the debtor, the Court may deny discharge of the debt.

Consumer debtors are required to complete a Credit Counseling Course given by a qualified provider within 180 days prior to filing of their bankruptcy petition.  The law in this area is very strict and the Court is required to dismiss the bankruptcy case if this requirement is not met prior to filing.

Once you have filed, the court will set a date for an appearance which is called the “Meeting of Creditors,” or “341″ meeting.  The court will notify you and all of your creditors of the time and place of the meeting and you will be required to attend.  Even if you are represented by an attorney you must personally attend this meeting along with your attorney.  No judge is present at this meeting, which is conducted by the bankruptcy trustee.  In most consumer cases this meeting is short with few, if any, creditors appearing.  At the meeting, the trustee will place the debtor under oath and ask general questions regarding the bankruptcy petition to ensure that the debtor has truthfully and accurately disclosed all of their property and debts.  Individual creditors, if they appear, are given an opportunity to ask limited questions of the debtor.

When a bankruptcy case is filed, a legal entity referred to as the “bankruptcy estate” is created comprised of all your non-exempt property as of the date the bankruptcy petition is filed.  In many consumer cases there is little to no non-exempt property.  The judge will appoint a trustee who will act as the representative of your estate.  The trustee’s duty is to take possession of the non-exempt property, to examine creditors’ claims, and to determine whether they are proper, and to sell the bankruptcy estate property in order to reduce it to cash for distribution to your creditors.  It is also the duty of the trustee to determine whether you have properly listed all of your assets, to determine if there is a reason why you may not be entitled to discharge any of your debts, or whether there is some reason why he or she should ask the bankruptcy judge to deny your discharge.  The trustee does not make the final decision on any of these matters, but has the responsibility of spotting and raising these issues with the Court.

In some cases the trustee or a creditor may object to the debtor’s eligibility to receive a discharge of debts.  If the trustee or creditor objects to the discharge of debt, for example, on the basis that the debt arose through the debtor’s fraud, then the Court would hold a hearing on the objection during which the trustee or creditor would have to prove the case before th bankruptcy judge as with any other lawsuit.  If there is no objections to the discharge of a particular debt, then it will be discharged.  There are also instances where a discharge will be denied as to all debts; for example, where the debtor has purposely concealed records from the trustee in order to hide assets.

Any person contemplating bankruptcy should make every effort to ensure that their bankruptcy filing is done in good faith.  That is, they should avoid incurring new debts such as willful running up of credit card balances in contemplation of filing bankruptcy.  Property should not be transferred or concealed to avoid its loss to creditors during the bankruptcy proceedings.  Bankruptcy fraud is a criminal act which can result in the debtor being denied a discharge of their debts and can even result in imprisonment in Federal Prison.

Although you do not need an attorney to file a bankruptcy petition, you should consider seeking the advice of an attorney if you are unsure of your rights and duties under bankruptcy law.

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