Bankruptcy laws are codified in Title 11 of the United States Code, and it is federal law that governs all bankruptcy cases. The goal of the Bankruptcy Code is to provide debtors a fresh start from overwhelming, burdensome debt.
Each bankruptcy case has a debtor, a judge, a bankruptcy panel trustee and a US Trustee. The debtor is the person who filed a petition asking the Bankruptcy Court for bankruptcy relief of debts. The judge in each case is the person with decision-making power over the case and is a court official. The panel trustee is the person who is in charge of the bankruptcy estate. The bankruptcy estate is all of the property of the debtor at the time of filing. It is the trustee’s responsibility to review the debtor’s petition and schedules and bring actions against creditors or the debtor to recover property of the bankruptcy estate. The US Trustee is an officer of the Justice Department and supervises the administration of the bankruptcy estate, the panel trustees, and has various other duties.
Every bankruptcy case begins with the filing of a petition for relief. Along with the petition, the debtor files schedules and statements. The schedules and statements describe property, income, expenses, transactions with regards to property, etc. The debtor must attend a credit counseling class before the case is filed in Bankruptcy Court. This class is required by law. Once the case is filed in court, the automatic stay comes into effect. This stops any lawsuits, foreclosures, garnishments, and all collection activity against the debtor as soon as the petition is filed. Approximately 30 days after the filing of the petition, the creditors’ meeting or 341 meeting is held. The debtor is questioned under oath about his/her financial affairs by the panel trustee, creditors, or the US Trustee. The debtor must then complete a financial management course. Failure to take this required course will cause the debtor’s case to be dismissed, and the debtor will not receive a discharge of his/her debts. The next step in the process is receiving a discharge of debt. How long after the filing of the petition the debtor receives a discharge of the debt is dependent on which chapter is filed. A discharge means that the debtor is no longer personally liable for certain dischargeable debts set forth in the Bankruptcy Code. Once a discharge is granted in the case, the Bankruptcy Court will close the case shortly thereafter.
Not all types of debts are dischargeable. The most common types of non-dischargeable debts are certain types of taxes, spousal support or child support, debts for willful and malicious injuries to individuals or property, debts to governmental units for fines or penalties, debts for most government funded or guaranteed educational loans or benefit overpayments, debts for personal injury caused by the debtor’s operation of a motor vehicle while under the influence of drugs or alcohol, debts owed to certain tax-advantaged retirement plans, debts for certain condominium or cooperative housing fees, and debts that were not listed on the schedules or statements.
A fresh start is available to debtors who are honest. A discharge can be revoked for various reasons including failure to disclose property, fraudulently obtaining a discharge, and committing one of several acts of impropriety described in the Bankruptcy Code.