Which Chapter is Right For Me?

This bankruptcy information is from the United States Bankruptcy Court in the Eastern District of California:

Upon filing the original petition with the Clerk's Office, the "automatic stay" immediately takes effect and prohibits all creditors from taking certain collection actions against the debtor or the debtor's property. Although the stay is automatic, creditors need to be advised of the stay. The court issues a notice to all creditors advising them of the filing of the bankruptcy, the case number, the automatic stay, the name of the trustee assigned to the case (if filed under chapter 7, 12, or 13), the date set for the meeting of creditors (called the "341 meeting"), the deadline, if any, set for filing objections to the discharge of the debtor and/or the dischargeability of specific debts, and whether and where to file claims. The exact information in the notice differs depending on the chapter under which the case is filed.

There are many exceptions to the automatic stay. Several new limitations on the imposition of the automatic stay, especially for repeat filers, were included in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The most prominent of these exceptions 17 relates to the termination of the stay against the debtor on the 30th day after the filing of a new case if the debtor had a prior case dismissed within one year of filing the present case, or if a debtor fails to accept a lease. The stay can be extended by the Court with a showing of good cause. In addition, there is an exception allowing the commencement of a civil proceeding regarding child custody or visitation, domestic violence or the dissolution of marriage, but not division of property. Other new exceptions include the continuation of an eviction or unlawful detainer action involving a residential lease. Because this is a very complex area of the law, you may wish to seek legal assistance before proceeding legally against a party who has filed for bankruptcy protection.

In a chapter 7 case involving an individual debtor, the creditors generally have sixty (60) days from the first date set for the meeting of creditors to object to the discharge of the debtor and/or the dischargeability of a specific debt. If the deadline passes without any objections to the debtor's discharge being filed, the court will issue the discharge order. If any objections to the dischargeability of specific debts are filed, they will be heard by the court, but will not delay the granting of a discharge with respect to other debts. An objection to discharge or to the dischargeability of certain debts is considered a separate lawsuit (an adversary proceeding) within the bankruptcy and may result in a trial before the judge assigned to the case. Corporate and partnership chapter 7 debtors do not receive a discharge. If there are no assets from which a dividend can be paid, the trustee will prepare a report of no distribution and the case will be closed. If there are assets that are not exempt, funds will be available for distribution to creditors. The court will set claims deadlines and notify all creditors to file their claims. The trustee will proceed to collect the assets, liquidate them and distribute the proceeds to creditors. When the assets have been completely administered, the court will close the case. To obtain a discharge, the debtor must complete a personal financial management course. If the certification of completion of an approved personal financial education course is not filed within 45 days of the meeting of creditors, the court will simply close the case without entering a discharge.

In a chapter 11 case, a debtor's conference is held with the United States Trustee's staff before the creditors' meeting. At the debtor's conference, the United States Trustee will go over the responsibilities and restrictions on the debtor-in-possession, explain the quarterly fees and monthly operating reports, and generally discuss the financial situation of the debtor and the scope of the anticipated plan of reorganization. A disclosure statement must be filed with the plan and approved by the court before votes for and against the plan can be solicited. After the estate has been fully administered, the court enters a final decree closing the case. A chapter 11 estate may be considered fully administered and closed before the payments required by the plan have been completed.

In a chapter 12 case, the confirmation hearing must be concluded within forty-five (45) days of filing the plan. The court may consider dismissal of the case if a plan is not confirmed.

In a chapter 13 case, creditors are given an opportunity to object to the plan. If no objection is filed by creditors or the trustee, the plan may be confirmed as filed. Once the plan is confirmed, the trustee will distribute the proceeds of the debtor's plan payments to creditors until the debtor completes the plan or the court dismisses or converts the case. The creditors generally have sixty (60) days from the first date set for the meeting of creditors to object to the dischargeability of a specific debt involving fraud or a willful or malicious action. Upon completion of the chapter 13 plan, the court will issue a discharge order, the trustee will prepare a final report, and the case will be closed. To obtain a discharge, the debtor must complete a personal financial management course.

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