Chapter Three. Filing a Petition After reading this chapter, you will be able to: Describe the “gatekeeper” provisions in individual bankruptcy cases
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Transcript Chapter Three. Filing a Petition After reading this chapter, you will be able to: Describe the “gatekeeper” provisions in individual bankruptcy cases
Chapter Three.
Filing a Petition
After reading this chapter, you will be able to:
Describe the “gatekeeper” provisions in
individual bankruptcy cases
Understand how a bankruptcy is initiated, by
filing of a voluntary or involuntary petition
Define prepetition credit counseling
Describe how a voluntary bankruptcy petition
is filed by a debtor
Describe how an involuntary petition is filed by
creditors
Define an “order of relief”
Prepetition Credit Counseling
Prerequisite to an individual debtor seeking
bankruptcy relief.
An individual seeking bankruptcy relief may
not be a debtor and must participate in an
individual or group credit counseling session
from an approved credit counseling agency
within 180 days prior to the filing of a petition.
Exceptions to Prepetition Credit
Counseling
First, the United States Trustee may exempt a district from the
requirement if the Trustee determines that approved credit
counseling services in a district are not reasonably able to
provide counseling services to individuals.
Second, a debtor may file a certification with the court at the
time of filing stating that ‘‘exigent circumstances’’ merit a
waiver of the rule, provided that the debtor has made a request
for counseling services and could not obtain them within five
days of making a request from a counseling agency.
The third exception to the prepetition credit counseling
requirement arises if, after notice and a hearing, the court finds
that a debtor is not able to comply with the requirement due to
mental incapacity, physical disability, or active military service in
a military combat zone.
Practice Pointer
It is important to check the local rules for your
jurisdiction. Some courts will dismiss the case
automatically without a hearing if the
certification seeking a waiver is not filed with
the petition.
Debt Relief Agency
A debt relief agency is any person, including
a bankruptcy attorney or bankruptcy petition
preparer, providing bankruptcy assistance to
assisted persons for money or other valuable
consideration pursuant to 11 U.S.C.
§101(12A).
Debt relief agencies are subject to written
retainer and disclosure requirements of 11
U.S.C. §§527 and 528
Voluntary Bankruptcy
A bankruptcy proceeding initiated by a debtor
filing a petition for relief.
Also known as a voluntary petition.
Most bankruptcy proceedings are voluntary.
Order of Relief
A debtor is not legally bankrupt until the court
enters an order for relief.
This order is automatic when a voluntary
petition is filed.
It is the judgment that the petitioning creditors
seek in an involuntary petition.
Venue
A proceeding may be commenced in any district
meeting one of the following qualifications:
(1) the district in which the petitioner is domiciled,
resides, or has its principal place of business
(2) the district in which the debtor’s principal
United States assets are located
(3) the district in which the debtor has complied
with either of the above for the greatest portion of
the 180 days preceding the petition’s filing
Statement of Financial Affairs
The Statement of Financial Affairs is a
questionnaire designed to elicit information
sufficient to determine whether the debtor
should receive a discharge or to reveal the
existence of preferences or other avoidable
transactions.
Schedules
Schedules are an extended form of an
accrual-based financial statement disclosing
all liabilities and all assets of the debtor.
Involuntary Bankruptcy
A bankruptcy proceeding initiated by one or
more creditors by filing a petition seeking the
entry of an order of relief, a judgment that the
debtor is bankrupt.
Also known as an involuntary petition.
Section 303 of the Bankruptcy Code governs
involuntary petitions.
Contested Involuntary Petition
When an involuntary petition is contested, the
court must be able to make one of two
findings to enter an order for relief:
The first is that the debtor is not generally
paying its debts as they become due.
The second is that within 120 days prior to the
filing, a custodian has been appointed to
administer assets of the debtor.
Practice Pointer
Under the Code, ‘‘insolvent’’ means a
financial situation in which the debtor’s debts
are greater than the fair valuation of all of
his/her assets, exclusive of any exempt
property or property improperly transferred or
concealed. See 11 U.S.C. §101(32).