Bankruptcy Law

Borders Bookstore: Chapter 11 Bankruptcy Protection.

2011-02-16T10:13:00.000-08:00

Submitted on 02/16/2011 - 12:03 PM

NEW YORK (Bankruptcy Watch) — Should anyone be surprised to learn that the Borders Group Inc., the troubled book-store chain, is experiencing more bad news? Its stock continues to fall as it filed for Chapter 11 protection. The beleaguered company now faces the sad task of shutting about 30% of its stores across the country in the upcoming weeks. Haven’t we seen this before, America? You could change the name of the company to, say, “Tower” and see the same sort of story from a few years ago, when that music chain fell on hard times.

Our nation is moving more and more to electronic commerce — and the book business is a victim of the changing public tastes. This is, as all collapses go, a sign of the times. Maybe Borders /quotes/comstock/11i!bgpiq (BGPIQ 0.23, +0.02, +8.76%) (s:bgp) simply had no chance here. Perhaps the e-commerce tsunami sweeping the globe will simply batter any brick-and-mortar structure in its way, no matter how storied its past.

The Borders example hammers home the point that no company is safe from the e-commerce explosion. Consumers want two things, above all, from corporate America: convenience and low prices. And you know, we will pay for convenience, if we have to. It is that important to us. An operation such as Blockbuster /quotes/comstock/11i!bloaq (BLOAQ 0.13, +0.00, +1.63%) staked its name on having the ability to let customers get all of their movie videos in one place. That was a popular idea for a while. Then Netflix /quotes/comstock/15*!nflx/quotes/nls/nflx (NFLX 238.40, -2.39, -0.99%) came along with a better mousetrap and used the Web to attract consumers.

Now it is Borders’ turn to reflect on the damage that the Internet has caused its business.

There’s nothing like a cautionary tale to make someone sit up and take notice.

Twitter’s approach to advertisers

~ Twitter Ads! ~
February 16, 2011

Twitter hopes to generate something like $100 million from advertising this year (2011) but first it has to teach people how to buy its ads. Here's their how-to guide, and what it says about the state of Twitter’s business.

SAN FRANCISCO, CA (Bankruptcy Watch) — Borders Group Inc. on Wednesday filed for bankruptcy, paying the price for its failed bid to compete with the likes of Amazon.com by pushing its brick-and-mortar business model.

As part of the Chapter 11 process, Borders /quotes/comstock/11i!bgpiq (BGPIQ 0.23, +0.02, +8.76%) will close 30% of its 642 stores, or about 200 that it identifies as underperforming. The bookseller operated twice that many at its peak in 2003.

The Ann Arbor, Mich.-based company listed debt of $1.29 billion and assets of $1.28 billion at the end of 2010 in its bankruptcy filing.

Borders, according to the filing, owes tens of millions of dollars to various publishers, including $41 million to Penguin Putnam /quotes/comstock/13*!pso/quotes/nls/pso (PSO 16.95, -0.14, -0.82%) , $37 million to Hachette Book Group, and $34 million to Simon & Schuster /quotes/comstock/13*!cbs/quotes/nls/cbs (CBS 21.66, +0.01, +0.02%) /quotes/comstock/13*!cbs.a/quotes/nls/cbs.a (CBS.A 21.77, -0.05, -0.23%) .

“Borders Group does not have the capital resources it needs to be a viable competitor,” President Mike Edwards said. He placed the blame primarily on lower customer spending and lack of liquidity.

Borders lined up $505 million in debtor-in-possession financing with GE Capital, the lending arm of General Electric Co. /quotes/comstock/13*!ge/quotes/nls/ge (GE 21.33, -0.13, -0.61%) , as it begins reorganization proceedings in the U.S. Bankruptcy Court, Southern District of New York.

In one of its critical errors, Borders initially eschewed a major online presence, opting to roll out more superstores while Amazon.com Inc. /quotes/comstock/15*!amzn/quotes/nls/amzn (AMZN 187.00, -2.03, -1.08%) and Apple Inc. /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 362.98, +3.08, +0.86%) cashed in on a growing consumer appetite for electronic books.

By the time Borders embraced e-commerce in recent years, the competition had already established a firm lead.

Rival and leading bookseller Barnes & Noble Inc. /quotes/comstock/13*!bks/quotes/nls/bks (BKS 18.86, +0.17, +0.91%) stands to be a big winner in light of the filing, according to S&P Equity Research analyst Michael Souers, who raised his price target on the stock by $6 to $21.

“Not only will sales likely benefit, but this should also increase BKS’ buying power with vendors,” he said, calling Borders’ bankruptcy a “huge boon” for Barnes & Noble.

Goldman Sachs analyst Matthew Fassler upgraded Barnes & Noble to neutral from sell ahead of the filing, though he tempered expectations as the benefits are “likely baked into the Street’s thinking.”

Barnes & Noble shares moved fractionally higher to $18.75 but have lost nearly 12% in the past year.

It appears that the Borders store in North Raleigh's Six Forks Station will be the one stand-alone Borders store to survive the retailer's bankruptcy filing. The company announced thsi morning that it had filed for Chapter 11 bankruptcy protection and would be closing about 30 percent of its stores "in the next several weeks." A list posted on the Borders website dedicated to the closure includes four Triangle locations as being among the affected stores.

The stores in Cary, Apex, Chapel Hill and the store at 404 E. Six Forks Road in Raleigh will all close. The only other North Carolina store on the list is located in Greensboro.

Locally, that will leave just the North Raleigh store at 8825 N. Six Forks Road in Six Forks Station and the two Borders stores at Raleigh-Durham International Airport.

According to the Borders press release this morning, "The company emphasized that the closings were a reflection of economic conditions, cost structures and viability of locations, among other factors, and not on the dedication and productivity of the workforce in these stores."

Bankruptcy Courts, Forms & Filings - 2010

2010-01-29T21:20:00.001-08:00

February 6, 2010

UPDATED CENSUS BUREAU DATA & ADMINISTRATIVE EXPENSE MULTIPLIERS (FEBRUARY 2, 2010): The Census Bureau’s Median Family Income Data and Administrative Expense Multipliers accessible through the "Means Testing Information" page have been updated. The U.S. Trustee Program will apply the updated data to all cases filed on or after March 15, 2010.

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What is Bankruptcy?

September 20, 2010

Bankruptcy is the outcome of an individual or organization running out of funds, and being unable to make payments for products and services purchased. It is a “legally declared inability” to pay creditors and is often sought by creditors against a business or organization in an attempt to recover some or most of what is owed to them. Thus the debtor or the creditors can file for bankruptcy.

This leads to an evaluation of all the assets of the debtor and using them to repay all or part of his outstanding debts. The debtor then is allowed to start a fresh and his old debts are forgiven, but it affects his home, his credit rating, his business, and his life can never be the same since he will carry the stigma attached with bankruptcy for a long time.

Bankruptcy is permitted under the United States Constitution and every district of the country has special bankruptcy courts to resolve cases. An individual, a firm or a partnership can file for a bankruptcy in court, or less frequently, creditors can petition the court to declare the business bankrupt so that their assets can be used to settle creditor claims. The court then appoints a trustee, that is, an individual who is either an officer of the bankruptcy court called the Official Receiver, or an insolvency practitioner who is an authorized debt specialist. It is the job of the trustee to gather information about the debtor’s financial situation and protect his assets so that they may be used for paying off creditors.

Impact of bankruptcy on debtor

◦Closure of the business due to lack of funds
◦Dismissal of employees
◦Loss of job for the debtor
◦Debtor can no longer make direct payments
◦Forfeit all assets
◦Spare income from other sources used to settle creditor claims
◦Loss of financial interest in home property
◦Credit rating affected
◦Difficult to raise funds since bankruptcy records are maintained for 6 years

Types of bankruptcy

The United States Bankruptcy Code lists four types of bankruptcy. The debtor has to decide on the type of bankruptcy he can file for, on the basis of ownership of the business, whether it is sole proprietorship or a partnership.

1. Chapter 7 bankruptcy is a liquidation bankruptcy which most people file for. This stipulates that the appointed trustee will sell all the non-exempt assets of the debtor and use the funds received from the sale to settle the maximum number of debts. The debt that cannot be repaid is discharged. Chapter 7 bankruptcy is available for individuals and companies. Business cannot continue once bankruptcy has been filed and income generated after filing goes to the debtor and cannot be used to settle claims.
2. Chapter 11 bankruptcy is filed by most businesses and is very complicated. The debtor continues his operations, retains ownership of all his assets but has to work out a reorganization plan for settling the dues of all his creditors. Previously, the business could take any amount of time to chart a reorganization plan, but with the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act 2005, a 120-day limit has been set to finalize the plan.
3. Chapter 12 bankruptcy applies to farm owners who retain their assets and have to formulate a repayment plan to settle dues.
4. Chapter 13 bankruptcy is similar to chapter 11 but applicable to individuals who retain their asset ownership and have to work out a 3-5 year repayment plan. Some limits are imposed on the debt involved and some debts are discharged.

Thinking about Filing Bankruptcy?

Filing bankruptcy is perhaps the most difficult decision you'll ever make! I'm sure you have many questions about filing bankruptcy. Questions like, "Am I qualified to file bankruptcy" , "How hard is it to file on my own bankruptcy", "How much does it cost" and the most important question of all; "Can I file my own bankruptcy without an attorney?" Get answers to these questions using this FREE "Do it Yourself" Bankruptcy Site to see if filing bankruptcy is the right solution for solving your personal debt problems.

Under the rules enacted in 2005, the first step in figuring out whether you can file for Chapter 7 bankruptcy is to measure your "current monthly income" against the median income for a household of your size in your state. If your income is less than or equal to the median, you can file for Chapter 7 bankruptcy. If it is more than the median, however, you must pass "the means test" -- another requirement of the new law -- in order to file for Chapter 7.

The Means Test

The purpose of the means test is to figure out whether you have enough disposable income, after subtracting certain allowed expenses and required debt payments, to make payments on a Chapter 13 plan. To find out whether you pass the means test, you subtract certain allowed expenses and debt payments from your current monthly income. If the income that's left over after these calculations is below a certain amount, you can file for Chapter 7. If you're looking for an easy way to determine your eligibility under the means test, use the online means test calculator, created by the applicable income and expense standards for your state, county, and region to determine your eligibility.

Are You Eligible for Chapter 7?

Despite what you may have heard about recent changes in bankruptcy law, most people who need bankruptcy protection are still eligible.

Are you?

This "Means Testing Calculator" will help you find out.

IMPORTANT:The Census Bureau’s Median Family Income Data and Administrative Expense Multipliers accessible through the "Means Testing Information" page have been updated. The U.S. Trustee Program will apply the updated data to all cases filed on or after March 15, 2010.

Credit Counseling

IMPORTANT: A change to the bankruptcy law, effective October 17, 2005, requires credit counseling from a government approved organization sometime within the six month period before filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.

Before you can file for bankruptcy under either Chapter 7 or Chapter 13, you must complete credit counseling with an agency approved by the United States Trustee's office. (To find an approved agency in your area, go to the Trustee's website, click "Credit Counseling and Debtor Education".) The purpose of this counseling is to give you an idea of whether you really need to file for bankruptcy or whether an informal repayment plan would get you back on your economic feet.

Counseling is required even if it's obvious that a repayment plan isn't feasible or you are facing debts that you find unfair and don't want to pay. You are required only to participate, not to go along with any repayment plan the agency proposes. However, if the agency does come up with a repayment plan, you will have to submit it to the court, along with a certificate showing that you completed the counseling, before you can file for bankruptcy.

Although there is a wealth of FREE information that will answer most of your questions, let me be perfectly clear here; filing bankruptcy should be your last resort! You always have the option to file yourself or hire an attorney. BEFORE deciding you should arm yourself with as much information as possible. You especially need to know the difference between Chapter 7 and 13 because they offer very different forms of protection. I highly recommend consulting a bankruptcy attorney before deciding what to do!

Bankruptcy Courts & Filing Bankruptcy

Each of the 94 federal judicial districts handles bankruptcy matters, and in almost all districts, bankruptcy cases are filed in the bankruptcy court. Bankruptcy cases cannot be filed in state court. Bankruptcy laws help people who can no longer pay their creditors get a fresh start by liquidating their assets to pay their debts, or by creating a repayment plan.

Bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation. These procedures are covered under Title 11 of the United States Code (the Bankruptcy Code). The vast majority of cases are filed under the three main chapters of the Bankruptcy Code, which are Chapter 7, Chapter 11, and Chapter 13.

Bankruptcy Forms & Filing Bankruptcy

"Official Bankruptcy Forms must be used to file and take action in bankruptcy cases. Procedural Forms also may be necessary for use during the course of some bankruptcy proceedings."

The Official Bankruptcy Forms are posted to publicize the content and format of the forms and may be used by the public in bankruptcy cases.

Instructions for some of the Official Bankruptcy Forms are unavailable because they are under revision. The revised Instructions will be posted here as they are available.

Fillable forms. To enhance usability, some of the forms can be filled in electronically. After completion, such "fillable forms" should be printed and filed by using the "print" button at the bottom of the form. If additional space is needed to complete a field in a fillable form, use a separate sheet of paper and include the case name, case number (if known), and a description or the number of the field being continued.

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United States Trustee Program

2009-03-01T14:13:00.000-08:00

Welcome and thank you for visiting our Web page. This blog contains information about the United States Trustee Program and the federal bankruptcy system. Brought to you by Williby Blogs! • Updated regularly • Bookmark us & Tell a Friend! •» Note: "The information & links connect to resources available and are provided with the understanding that they represent only a starting point for research."

United States

Trustee Program

The United States Trustee Program is the component of the Department of Justice responsible for overseeing the administration of bankruptcy cases and private trustees under 28 U.S.C. § 586 and 11 U.S.C. § 101, et seq.

It consists of an Executive Office for U.S. Trustees (EOUST) in Washington, DC; 21 regional U.S. Trustees; and 95 field offices.

The United States Trustee Program is a component of the Department of Justice that seeks to promote the efficiency and protect the integrity of the Federal bankruptcy system. To further the public interest in the just, speedy and economical resolution of cases filed under the Bankruptcy Code, the Program monitors the conduct of bankruptcy parties and private estate trustees, oversees related administrative functions, and acts to ensure compliance with applicable laws and procedures. It also identifies and helps investigate bankruptcy fraud and abuse in coordination with United States Attorneys, the Federal Bureau of Investigation, and other law enforcement agencies.

Background of the

U.S. Trustee Program

The Program was established by the Bankruptcy Reform Act of 1978 (11 U.S.C. § 101, et seq.) as a pilot effort encompassing 18 districts. It was expanded to 21 Regions nationwide, covering all Federal judicial districts except Alabama and North Carolina (see Note below), by enactment of the Bankruptcy Judges, U.S. Trustees, & Family Farmer Bankruptcy Act of 1986 (Pub. L. 99-554, 100 Stat. 3088, reprinted in part at 28 U.S.C. § 581, note). The Program is funded by the United States Trustee System Fund, which consists primarily of fees paid by parties and businesses invoking Federal bankruptcy protection.

Bankruptcy cases in Alabama and North Carolina are not under the jurisdiction of the United States Trustee Program. Questions regarding bankruptcy cases filed in the six judicial districts in those states should be directed to the Bankruptcy Administrator for the district where the case is pending. Contact information for the Bankruptcy Administrators is available on the federal judiciary's Web site at http://www.uscourts.gov/bankruptcycourts/administrators.html.

Primary Role of the

United States

Trustee Program

The primary role of the U.S. Trustee Program is to serve as the "watchdog over the bankruptcy process." As stated in the USTP Mission Statement:

The USTP Mission is to promote integrity and efficiency in the nation’s bankruptcy system by enforcing bankruptcy laws, providing oversight of private trustees, and maintaining operational excellence.

The Attorney General is charged with the appointment of United States Trustees and Assistant United States Trustees. The Executive Office for U.S. Trustees (EOUST) in Washington, D.C., provides general policy and legal guidance, oversees the Program's substantive operations, and handles administrative functions. The Director of the Executive Office, whose authority derives from the Attorney General, oversees a staff comprised of the Offices of the Director, General Counsel, Administration, Review & Oversight, and Research & Planning. The Executive Office also provides administrative and management support to individual U.S. Trustee Offices in their implementation of Federal bankruptcy laws. See 28 U.S.C. §§ 581-589a.

Principal U.S. Trustee Duties

under the Bankruptcy Code

United States Trustees supervise the administration of the following cases filed under the Federal Bankruptcy Code:

•Liquidation proceedings under Chapter 7 — In Chapter 7 "liquidation" proceeding, those assets that are not exempt from creditors are collected and liquidated (reduced to money). The proceeds are distributed to creditors by a private trustee appointed to administer the debtor's estate under Chapter 7 (see generally 11 U.S.C. §§701-704). An eligible debtor may receive a "discharge" from his or her debts under Chapter 7, except for certain debts that are prohibited from discharge by the Bankruptcy Code.

•Reorganization proceedings (usually business-related) under Chapter 11 — Chapter 11 offers a procedure by which an individual or a business may attempt to "reorganize" its debts while continuing to operate. The vast majority of Chapter 11 cases are filed by businesses. The debtor, often with the participation of creditors, creates a reorganization plan under which to repay all or part of its debts. The "debtor in possession" may generally continue business operations pending reorganization, unless a trustee is appointed under Chapter 11 (see, e.g., 11 U.S.C. §1104).

•Section 1930(a)(6) of the U.S. Code (28 U.S.C. §1930(a)(6)) prescribes "quarterly fees" that are to be paid by Chapter 11 debtors to the U.S. Trustee Program. In essence, quarterly fees accrue throughout the pendency of a Chapter 11 reorganization case (i.e., until the case is closed, dismissed, or converted to another chapter) and are payable on a quarterly basis, 30 days following the end of each calendar quarter. "The amount of the quarterly fee [is] calculated according to a graduated scale based on the total sum of disbursements" as specified in §1930(a)(6), and "disbursements" include all pre- and post-confirmation payments made by or on behalf of the debtor, including routine operating expenses. See, e.g., Tighe v. Celebrity Home (In re Celebrity Home Entertainment, Inc.), 210 F.3d 995 (9th Cir. April 21, 2000). For more information regarding Chapter 11 quarterly fees, please contact the Office of the United States Trustee in the judicial district where the case was filed.

•Family farm and fisherman reorganization proceedings under Chapter 12 — Chapter 12 allows an eligible family farmer or a fisherman to file for bankruptcy, reorganize the business' affairs of the farm or fishing business, repay all or part of the business' debts, and continue operating. A "standing trustee" appointed by the United States Trustee under 28 U.S.C. §586(b) typically serves as the trustee of the debtor's estate pending fulfillment of the debtor's repayment obligations under a plan confirmed by the U.S. Bankruptcy Court where the case was filed.

•"Wage-earner" reorganization proceedings under Chapter 13 — Chapter 13, often called wage-earner bankruptcy, is used primarily by individual consumers to reorganize their financial affairs under a repayment plan that must be completed within three or five years. To be eligible for Chapter 13 relief, a consumer must have regular income and may not have more than a certain amount of debt, as set forth in the Bankruptcy Code. A "standing trustee" appointed by the United States Trustee under 28 U.S.C. §586(b) typically serves as the trustee of the debtor's estate pending fulfillment of the debtor's repayment obligations under a plan confirmed by the U.S. Bankruptcy Court where the case was filed.

Specific responsibilities
of the
United States Trustees include:

•Appointing and supervising private trustees who administer Chapter 7, 12, and 13 bankruptcy estates (and serving as trustees in such cases where private trustees are unable or unwilling to serve);

•Taking legal action to enforce the requirements of the Bankruptcy Code and to prevent fraud and abuse;

•Referring matters for investigation and criminal prosecution when appropriate;

•Ensuring that bankruptcy estates are administered promptly and efficiently, and that professional fees are reasonable;

•Appointing and convening creditors' committees in Chapter 11 business reorganization cases;

•Reviewing disclosure statements and applications for the retention of professionals; and

•Advocating matters relating to the Bankruptcy Code and rules of procedure in court.

Detecting and combating Bankruptcy Fraud is a U.S. Trustee Program priority.

For Further Information:

See Bankruptcy Fact Sheets & Consumer Notices
E-Mail the Executive Office for U.S. Trustees at: USTWeb
or Contact Us at:

Executive Office for U.S. Trustees
Office of the General Counsel
Department of Justice
20 Massachusetts Ave., N.W., Suite 8000
Washington, D.C. 20530
(202-307-1399/FAX-2397)

ADVISORY: The Department of Justice does not provide legal advice to individual members of the public. For specific bankruptcy-related advice, please consult qualified legal counsel. A list of private attorneys in your area may be available from your State bar association, local law schools, or legal aid clinics.

Credit Repair: How to Help Yourself

2008-10-28T09:42:00.000-07:00

You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail, and maybe even calls offering credit repair services. They all make the same claims:

“Credit problems? No problem!”

“We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

“We can erase your bad credit — 100% guaranteed.”

“Create a new credit identity — legally.”

The Federal Trade Commission (FTC) says do yourself a favor and save some money, too. Don’t believe these claims: they’re very likely signs of a scam. Indeed, attorneys at the nation’s consumer protection agency say they’ve never seen a legitimate credit repair operation making those claims. The fact is there’s no quick fix for creditworthiness. You can improve your credit report legitimately, but it takes time, a conscious effort, and sticking to a personal debt repayment plan.

Recognizing a Credit Repair Scam

Everyday, companies target consumers who have poor credit histories with promises to clean up their credit report so they can get a car loan, a home mortgage, insurance, or even a job once they pay them a fee for the service. The truth is, these companies can’t deliver an improved credit report for you using the tactics they promote. It’s illegal: No one can remove accurate negative information from your credit report. So after you pay them hundreds or thousands of dollars in fees, you’re left with the same credit report and someone else has your money.

If you see a credit repair offer, here’s how to tell if the company behind it is up to no good:

•The company wants you to pay for credit repair services before they provide any services. Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the services they have promised.

•The company doesn’t tell you your rights and what you can do for yourself for free.

•The company recommends that you do not contact any of the three major national credit reporting companies directly.

•The company tells you they can get rid of most or all the negative credit information in your credit report, even if that information is accurate and current.

•The company suggests that you try to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number.

•The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness.

If you follow illegal advice and commit fraud, you may find yourself in legal hot water, too:

•It’s a federal crime to lie on a loan or credit application, to misrepresent your Social Security number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.

•You could be charged and prosecuted for mail or wire fraud if you use the mail, telephone, or Internet to apply for credit and provide false information.

Your Rights Regarding Credit Repair

No one can legally remove accurate and timely negative information from a credit report. The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Some people hire a company to investigate on their behalf, but anything a credit repair clinic can do legally, you can do for yourself at little or no cost. According to the Fair Credit Reporting Act (FCRA):

You’re entitled to a free report if a company takes “adverse action” against you, like denying your application for credit, insurance, or employment. You have to ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.

Each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — are required to provide you with a free copy of your credit report once every 12 months, if you ask for it. The three companies have a central website, a toll-free telephone number, and a mailing address for consumers to order the free annual credit reports the government entitles them to.

To order:

Call: 1-877-322-8228, or
Visit website: annualcreditreport.com
(complete the Annual Credit Report Request Form)

Mail it to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

You can use the form in this brochure, or you can print it from ftc.gov/credit. You may order reports from each of the three consumer reporting companies at the same time, or you can stagger your requests, ordering one from each company throughout the year from the central address. Don’t contact the three nationwide consumer reporting companies individually or at another address because you may end up paying for a report that you’re entitled to get for free. In fact, each consumer reporting company may charge you up to $10.50 to purchase an additional copy of your report within a 12-month period.

It doesn’t cost anything to dispute mistakes or outdated items on your credit report. Under the FCRA, both the consumer reporting company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under the FCRA, contact the consumer reporting company and the information provider.

Helping Yourself

Step 1: Tell the consumer reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of any documents that support your position. In addition to providing your complete name and address, your letter should identify each item in your report you dispute; state the facts and the reasons you dispute the information, and ask that it be removed or corrected. You may want to enclose a copy of your report, and circle the items in question. Send your letter by certified mail, “return receipt requested,” so you can document that the consumer reporting company received it. Keep copies of your dispute letter and enclosures.

Your letter may look something like (this) <--Click here.

Sample Dispute Letter - Credit Report

2008-10-28T09:31:00.000-07:00

Date
Your Name
Your Address,
City, State, Zip Code

Complaint Department
Name of Company
Address
City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing.)

----------------------------------------------------------

Consumer reporting companies must investigate the items you question within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it is required to investigate, review the relevant information, and report the results back to the consumer reporting company. If this investigation reveals that the disputed information is inaccurate, the information provider has to notify the nationwide consumer reporting companies so they can correct it in your file.

When the investigation is complete, the consumer reporting company must give you the results in writing, too, and a free copy of your report if the dispute results in a change. If an item is changed or deleted, the consumer reporting company is not permitted to put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider. If you ask, the consumer reporting company must send notices of any correction to anyone who received your report in the past six months. You also can ask that a corrected copy of your report be sent to anyone who received a copy during the past two years for employment purposes.

If an investigation doesn’t resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay for this service.

Step 2: Tell the creditor or other information provider, in writing, that you dispute an item. Be sure to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider reports the item to a consumer reporting company, it must include a notice of your dispute. And if you are correct — that is, if the information is found to be inaccurate — the information provider may not report it again.

Bankruptcy Basics

2008-10-04T09:37:00.000-07:00

A Public Information Series of the Bankruptcy Judges Division

THE PAMPHLET

The Bankruptcy Judges Division’s Public Information Series pamphlet provides basic information to debtors, creditors, court personnel, the media, and the general public on different aspects of the federal bankruptcy laws. The series is also designed to provide individuals who may be considering bankruptcy with a basic explanation of the different chapters under which a bankruptcy case may be filed and to answer some of the most commonly asked questions about the bankruptcy process.

This pamphlet provides general information only. While every effort has been made to ensure that the information contained in it is accurate as of the date of publication, it is not a full and authoritative statement of the law on any particular topic. The information presented in the pamphlet should not be cited or relied upon as legal authority and should not be used as a substitute for reference to the United States Bankruptcy Code (title 11, United States Code) and the Federal Rules of Bankruptcy Procedure.

Most importantly, the pamphlet should not substitute for the advice of competent legal counsel or a financial expert. Neither the Bankruptcy Judges Division nor the Administrative Office of the United States Courts can provide legal or financial advice. Such advice may be obtained from a competent attorney, accountant, or financial adviser.

Read the Entire BANKRUPTCY BASICS PAMPHLET.

Bankruptcy Blog List

2008-09-17T01:53:00.000-07:00

Below is a complete list of the Bankruptcy Blogs on this site.

Bankruptcy Basics (Saturday, October 4, 2008)

What is Bankruptcy? (Sunday, September 14, 2008)

The Bankruptcy Process (Monday, September 15, 2008)

Bankruptcy - Glossary of Legal Terms (Tuesday, September 16, 2008)

Other Law related Blogs:

1. Landlord-Tenant Law

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Bankruptcy - Glossary of Legal Terms

2008-09-16T17:48:00.000-07:00

Most debtors who file a bankruptcy petition, and many of their creditors, know very little about the bankruptcy process. Bankruptcy Basics is designed to provide debtors, creditors, judiciary employees, and the general public with a basic explanation of bankruptcy and how it works. This glossary on bankruptcy terminology explains, in layman's terms, many of the legal terms that are used in cases filed under the Bankruptcy Code.

A

adversary proceeding: A lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the court. A nonexclusive list of adversary proceedings is set forth in Fed. R. Bankr. P. 7001.

assume: An agreement to continue performing duties under a contract or lease.

automatic stay: An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.

B

bankruptcy: A legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code).

bankruptcy administrator: An officer of the judiciary serving in the judicial districts of Alabama and North Carolina who, like the U.S. trustee, is responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors' committees; monitoring fee applications; and performing other statutory duties. Compare U.S. trustee.

Bankruptcy Code: The informal name for title 11 of the United States Code (11 U.S.C. §§ 101-1330), the federal bankruptcy law.

bankruptcy court: The bankruptcy judges in regular active service in each district; a unit of the district court.

bankruptcy estate: All legal or equitable interests of the debtor in property at the time of the bankruptcy filing. (The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.)

bankruptcy judge: A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.

bankruptcy petition: The document filed by the debtor (in a voluntary case) or by creditors (in an involuntary case) by which opens the bankruptcy case. (There are official forms for bankruptcy petitions.)

C

chapter 7: The chapter of the Bankruptcy Code providing for "liquidation,"(i.e., the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.)

chapter 9: The chapter of the Bankruptcy Code providing for reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts).

chapter 11: The chapter of the Bankruptcy Code providing (generally) for reorganization, usually involving a corporation or partnership. (A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.)

chapter 12: The chapter of the Bankruptcy Code providing for adjustment of debts of a "family farmer," or a "family fisherman" as those terms are defined in the Bankruptcy Code.

chapter 13: The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.)

chapter 15: The chapter of the Bankruptcy Code dealing with cases of cross-border insolvency.

claim: A creditor's assertion of a right to payment from the debtor or the debtor's property.

confirmation: Bankruptcy judges's approval of a plan of reorganization or liquidation in chapter 11, or payment plan in chapter 12 or 13.

consumer debtor: A debtor whose debts are primarily consumer debts.

consumer debts: Debts incurred for personal, as opposed to business, needs.

contested matter: Those matters, other than objections to claims, that are disputed but are not within the definition of adversary proceeding contained in Rule 7001.

contingent claim: A claim that may be owed by the debtor under certain circumstances, e.g., where the debtor is a cosigner on another person's loan and that person fails to pay.

creditor: One to whom the debtor owes money or who claims to be owed money by the debtor.

credit counseling: Generally refers to two events in individual bankruptcy cases: (1) the "individual or group briefing" from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and (2) the "instructional course in personal financial management" in chapters 7 and 13 that an individual debtor must complete before a discharge is entered. There are exceptions to both requirements for certain categories of debtors, exigent circumstances, or if the U.S. trustee or bankruptcy administrator have determined that there are insufficient approved credit counseling agencies available to provide the necessary counseling.

creditors' meeting: see 341 meeting

current monthly income: The average monthly income received by the debtor over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from nondebtors and income from the debtor's spouse if the petition is a joint petition, but not including social security income and certain other payments made because the debtor is the victim of certain crimes. 11 U.S.C. § 101(10A).

D

debtor: A person who has filed a petition for relief under the Bankruptcy Code.

debtor education: see credit counseling

defendant: An individual (or business) against whom a lawsuit is filed.

discharge: A release of a debtor from personal liability for certain dischargeable debts set forth in the Bankruptcy Code. (A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including telephone calls, letters, and personal contact.)

dischargeable debt: A debt for which the Bankruptcy Code allows the debtor's personal liability to be eliminated.

disclosure statement: A written document prepared by the chapter 11 debtor or other plan proponent that is designed to provide "adequate information" to creditors to enable them to evaluate the chapter 11 plan of reorganization.

E

equity: The value of a debtor's interest in property that remains after liens and other creditors' interests are considered. (Example: If a house valued at $100,000 is subject to a $80,000 mortgage, there is $20,000 of equity.)

executory contract or lease: Generally includes contracts or leases under which both parties to the agreement have duties remaining to be performed. (If a contract or lease is executory, a debtor may assume it or reject it.)

exemptions: exempt property Certain property owned by an individual debtor that the Bankruptcy Code or applicable state law permits the debtor to keep from unsecured creditors. For example, in some states the debtor may be able to exempt all or a portion of the equity in the debtor's primary residence (homestead exemption), or some or all "tools of the trade" used by the debtor to make a living (i.e., auto tools for an auto mechanic or dental tools for a dentist). The availability and amount of property the debtor may exempt depends on the state the debtor lives in.

F

family farmer or family fisherman: An individual, individual and spouse, corporation, or partnership engaged in a farming or fishing operation that meets certain debt limits and other statutory criteria for filing a petition under chapter 12.

fraudulent transfer: A transfer of a debtor's property made with intent to defraud or for which the debtor receives less than the transferred property's value.

fresh start: The characterization of a debtor's status after bankruptcy, i.e., free of most debts. (Giving debtors a fresh start is one purpose of the Bankruptcy Code.)

I

insider (of individual debtor): Any relative of the debtor or of a general partner of the debtor; partnership in which the debtor is a general partner; general partner of the debtor; or a corporation of which the debtor is a director, officer, or person in control.

insider (of corporate debtor): A director, officer, or person in control of the debtor; a partnership in which the debtor is a general partner; a general partner of the debtor; or a relative of a general partner, director, officer, or person in control of the debtor.

J

joint administration: A court-approved mechanism under which two or more cases can be administered together. (Assuming no conflicts of interest, these separate businesses or individuals can pool their resources, hire the same professionals, etc.)

joint petition: One bankruptcy petition filed by a husband and wife together.

L

lien: The right to take and hold or sell the property of a debtor as security or payment for a debt or duty.

liquidation: A sale of a debtor's property with the proceeds to be used for the benefit of creditors.

liquidated claim: A creditor's claim for a fixed amount of money.

M

means test: Section 707(b)(2) of the Bankruptcy Code applies a "means test" to determine whether an individual debtor's chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). Abuse is presumed if the debtor's aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $10,000, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $6,000. The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.

motion to lift the automatic stay: A request by a creditor to allow the creditor to take action against the debtor or the debtor's property that would otherwise be prohibited by the automatic stay.

N

no-asset case: A chapter 7 case where there are no assets available to satisfy any portion of the creditors' unsecured claims.

nondischargeable debt: A debt that cannot be eliminated in bankruptcy. Examples include a home mortgage, debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor's conviction of a crime. Some debts, such as debts for money or property obtained by false pretenses and debts for fraud or defalcation while acting in a fiduciary capacity may be declared nondischargeable only if a creditor timely files and prevails in a nondischargeability action.

O

objection to dischargeability: A trustee's or creditor's objection to the debtor being released from personal liability for certain dischargeable debts. Common reasons include allegations that the debt to be discharged was incurred by false pretenses or that debt arose because of the debtor's fraud while acting as a fiduciary.

objection to exemptions: A trustee's or creditor's objection to the debtor's attempt to claim certain property as exempt from liquidation by the trustee to creditors.

P

party in interest: A party who has standing to be heard by the court in a matter to be decided in the bankruptcy case. The debtor, the U.S. trustee or bankruptcy administrator, the case trustee and creditors are parties in interest for most matters.

petition preparer: A business not authorized to practice law that prepares bankruptcy petitions.

plan: A debtor's detailed description of how the debtor proposes to pay creditors' claims over a fixed period of time.

plaintiff: A person or business that files a formal complaint with the court.

postpetition transfer: A transfer of the debtor's property made after the commencement of the case.

prebankruptcy planning: The arrangement (or rearrangement) of a debtor's property to allow the debtor to take maximum advantage of exemptions. (Prebankruptcy planning typically includes converting nonexempt assets into exempt assets.)

preference or preferential debt payment: A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor's chapter 7 case.

presumption of abuse: see means test

priority: The Bankruptcy Code's statutory ranking of unsecured claims that determines the order in which unsecured claims will be paid if there is not enough money to pay all unsecured claims in full. For example, under the Bankruptcy Code's priority scheme, money owed to the case trustee or for prepetition alimony and/or child support must be paid in full before any general unsecured debt (i.e. trade debt or credit card debt) is paid.

priority claim: An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status. Priority refers to the order in which these unsecured claims are to be paid.

proof of claim: A written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money. (There is an official form for this purpose.)

property of the estate: All legal or equitable interests of the debtor in property as of the commencement of the case.

R

reaffirmation agreement: An agreement by a chapter 7 debtor to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy, usually for the purpose of keeping collateral (i.e. the car) that would otherwise be subject to repossession.

S

schedules: Detailed lists filed by the debtor along with (or shortly after filing) the petition showing the debtor's assets, liabilities, and other financial information. (There are official forms a debtor must use.)

secured creditor: A creditor holding a claim against the debtor who has the right to take and hold or sell certain property of the debtor in satisfaction of some or all of the claim.

secured debt: Debt backed by a mortgage, pledge of collateral, or other lien; debt for which the creditor has the right to pursue specific pledged property upon default. Examples include home mortgages, auto loans and tax liens.

small business case: A special type of chapter 11 case in which there is no creditors' committee (or the creditors' committee is deemed inactive by the court) and in which the debtor is subject to more oversight by the U.S. trustee than other chapter 11 debtors. The Bankruptcy Code contains certain provisions designed to reduce the time a small business debtor is in bankruptcy.

statement of financial affairs: A series of questions the debtor must answer in writing concerning sources of income, transfers of property, lawsuits by creditors, etc. (There is an official form a debtor must use.)

statement of intention: A declaration made by a chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate.

substantive consolidation: Putting the assets and liabilities of two or more related debtors into a single pool to pay creditors. (Courts are reluctant to allow substantive consolidation since the action must not only justify the benefit that one set of creditors receives, but also the harm that other creditors suffer as a result.)

341 meeting: The meeting of creditors required by section 341 of the Bankruptcy Code at which the debtor is questioned under oath by creditors, a trustee, examiner, or the U.S. trustee about his/her financial affairs. Also called creditors' meeting.

T

transfer: Any mode or means by which a debtor disposes of or parts with his/her property.

trustee: The representative of the bankruptcy estate who exercises statutory powers, principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the U.S. trustee or bankruptcy administrator. The trustee is a private individual or corporation appointed in all chapter 7, chapter 12, and chapter 13 cases and some chapter 11 cases. The trustee's responsibilities include reviewing the debtor's petition and schedules and bringing actions against creditors or the debtor to recover property of the bankruptcy estate. In chapter 7, the trustee liquidates property of the estate, and makes distributions to creditors. Trustees in chapter 12 and 13 have similar duties to a chapter 7 trustee and the additional responsibilities of overseeing the debtor's plan, receiving payments from debtors, and disbursing plan payments to creditors.

U

U.S. trustee: An officer of the Justice Department responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors' committees; monitoring fee applications; and performing other statutory duties. Compare, bankruptcy administrator.

undersecured claim: A debt secured by property that is worth less than the full amount of the debt.

unliquidated claim: A claim for which a specific value has not been determined.

unscheduled debt: A debt that should have been listed by the debtor in the schedules filed with the court but was not. (Depending on the circumstances, an unscheduled debt may or may not be discharged.)

unsecured claim: A claim or debt for which a creditor holds no special assurance of payment, such as a mortgage or lien; a debt for which credit was extended based solely upon the creditor's assessment of the debtor's future ability to pay.

V

Voluntary transfer: A transfer of a debtor's property with the debtor's consent.

The Bankruptcy Process

2008-09-15T23:48:00.000-07:00

Article I, Section 8, of the United States Constitution authorizes Congress to enact "uniform Laws on the subject of Bankruptcies." Under this grant of authority, Congress enacted the "Bankruptcy Code" in 1978. The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases.

The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the "Bankruptcy Rules") and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country. The bankruptcy courts generally have their own clerk's offices.

The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts. Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case.

A debtor's involvement with the bankruptcy judge is usually very limited. A typical chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection is raised in the case. A chapter 13 debtor may only have to appear before the bankruptcy judge at a plan confirmation hearing. Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which is usually held at the offices of the U.S. trustee. This meeting is informally called a "341 meeting" because section 341 of the Bankruptcy Code requires that the debtor attend this meeting so that creditors can question the debtor about debts and property.

A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial "fresh start" from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision:

"[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt."

Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934). This goal is accomplished through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts. This publication describes the bankruptcy discharge in a question and answer format, discussing the timing of the discharge, the scope of the discharge (what debts are discharged and what debts are not discharged), objections to discharge, and revocation of the discharge. It also describes what a debtor can do if a creditor attempts to collect a discharged debt after the bankruptcy case is concluded.

Six basic types of bankruptcy cases are provided for under the Bankruptcy Code, each of which is discussed in this publication. The cases are traditionally given the names of the chapters that describe them.

Chapter 7, entitled Liquidation, contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor's estate, reduces them to cash, and makes distributions to creditors, subject to the debtor's right to retain certain exempt property and the rights of secured creditors. Because there is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor's assets. These cases are called "no-asset cases." A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed. Amendments to the Bankruptcy Code enacted in to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require the application of a "means test" to determine whether individual consumer debtors qualify for relief under chapter 7. If such a debtor's income is in excess of certain thresholds, the debtor may not be eligible for chapter 7 relief.

Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a "plan" to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test. At a confirmation hearing, the court either approves or disapproves the debtor's repayment plan, depending on whether it meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.

Chapter 11, entitled Reorganization, ordinarily is used by commercial enterprises that desire to continue operating a business and repay creditors concurrently through a court-approved plan of reorganization. The chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves (confirms) or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations in order to return to profitability. Under chapter 11, the debtor normally goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.

Chapter 12, entitled Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income, provides debt relief to family farmers and fishermen with regular income. The process under chapter 12 is very similar to that of chapter 13, under which the debtor proposes a plan to repay debts over a period of time – no more than three years unless the court approves a longer period, not exceeding five years. There is also a trustee in every chapter 12 case whose duties are very similar to those of a chapter 13 trustee. The chapter 12 trustee's disbursement of payments to creditors under a confirmed plan parallels the procedure under chapter 13. Chapter 12 allows a family farmer or fisherman to continue to operate the business while the plan is being carried out.

Chapter 9, entitled Adjustment of Debts of a Municipality, provides essentially for reorganization, much like a reorganization under chapter 11. Only a "municipality" may file under chapter 9, which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts.

The purpose of Chapter 15, entitled Ancillary and Other Cross-Border Cases, is to provide an effective mechanism for dealing with cases of cross-border insolvency. This publication discusses the applicability of Chapter 15 where a debtor or its property is subject to the laws of the United States and one or more foreign countries.

In addition to the basic types of bankruptcy cases, Bankruptcy Basics provides an overview of the Servicemembers' Civil Relief Act, which, among other things, provides protection to members of the military against the entry of default judgments and gives the court the ability to stay proceedings against military debtors.

This publication also contains a description of liquidation proceedings under the Securities Investor Protection Act ("SIPA"). Although the Bankruptcy Code provides for a stockbroker liquidation proceeding, it is far more likely that a failing brokerage firm will find itself involved in a SIPA proceeding. The purpose of SIPA is to return to investors securities and cash left with failed brokerages. Since being established by Congress in 1970, the Securities Investor Protection Corporation has protected investors who deposit stocks and bonds with brokerage firms by ensuring that every customer's property is protected, up to $500,000 per customer.

The bankruptcy process is complex and relies on legal concepts like the "automatic stay," "discharge," "exemptions," and "assume." Therefore, the final chapter of this publication is a glossary of Bankruptcy Terminology which explains, in layman's terms, most of the legal concepts that apply in cases filed under the Bankruptcy Code.

What is Bankruptcy?

2008-09-14T16:39:00.000-07:00

What is Bankruptcy?

Bankruptcy is a legal proceeding in which people who cannot pay their bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops all of your creditors from seeking to collect debts from you, at least until your debts are sorted out according to the law.

On April 20, 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"). BAPCPA made substantial changes to the Bankruptcy Code. And the Bankruptcy Judges Division has made significant revisions to this online version of Bankruptcy Basics to account for BAPCPA's changes to the Code.

Most BAPCPA changes apply only to cases filed on or after October 17, 2005. Because the Bankruptcy Judges Division anticipates that there will continue to be a demand for the version of Bankruptcy Basics that describes the pre-BAPCPA bankruptcy process (for cases filed prior to October 17), this page contains links to PDF (print friendly) copies of both the pre-BAPCPA version as well as the current online version of Bankruptcy Basics.

(Adobe PDF Software required to view theses documents)

Bankruptcy Basics - For Cases Filed on or after October 17, 2005 (pdf)
Bankruptcy Basics - For Cases Filed before October 17, 2005 (pdf)

In 2005, the Bankruptcy Code was amended to require that most individual debtors complete a special briefing from an approved credit counseling agency before filing a bankruptcy case. In most states, the United States trustee is responsible for approving the providers that offer this special pre-bankruptcy briefing, and in the six districts located in Alabama and North Carolina, the bankruptcy administrator assigned to those districts approve them. The United States trustee and the bankruptcy administrators maintain a list of approved providers.

What are the Different Types of Bankruptcy?

There are six types of bankruptcy cases provided (only four are discussed here) under the law:

Chapter 7, is known as "straight" bankruptcy or "liquidation." It requires a debtor to give up property which exceeds certain limits called "exemptions", so the property can be sold to pay creditors.

In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts. The basic idea in a chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for "exempt" property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors.

If you want to keep property like a home or a car and are behind on the payments on a mortgage or car loan, a chapter 7 case probably will not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

Chapter 11, known as "reorganization", is used by business and a few individual debtors whose debts are very large.

Chapter 12 is reserved for family farmers.

Chapter 13, is called "debt adjustment". It requires a debtor to file a plan to pay debts (or parts of debts) from current income.

In a Chapter 13 case you file a "plan" showing how you will pay off some of your past due and current debts over three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property especially your home and car‑‑which might otherwise be lost, if you can make the payments which the bankruptcy law requires to be made to your creditors. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind.

You should consider filing a chapter 13 plan if you:

(1) own your home and are in danger of losing it because of money problems;
(2) are behind on debt payments, but can catch up if given some time;
(3) have valuable property which is not exempt, but you can afford to pay creditors from your income over time;
(4) have tax obligations which would not be discharged in a Chapter 7 bankruptcy.

You will need to have enough income in chapter 13 to pay for your necessities and to keep up with the required payments as they come due. The court sets a monthly payment that you make to a trustee and the trustee then pays your creditors the required payments.

Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.

What Can Bankruptcy Do for Me?

Bankruptcy may make it possible for you to:

Eliminate the legal obligation to pay most or all of your debts. This is called a "discharge" of debts. It is designed to give you a fresh financial start.

Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)

Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.

Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.

Restore or prevent termination of utility service.

Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.

What Can Bankruptcy Not Do?

Bankruptcy, however, cannot cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:

Eliminate certain rights of "secured" creditors. A "secured" creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can force secured creditors to take payment over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. However, you generally cannot keep the collateral unless you continue to pay the debt.

Discharge certain types of debts singled out by the bankruptcy law for special treatment such as child support, alimony, some student loans, court restitution orders, criminal fines, and some taxes.

Protect cosigners on your debts. When a relative or friend has co‑signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.

Discharge debts that arise after bankruptcy has been filed.

Bankruptcy Law

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Bankruptcy Courts, Forms & Filings - 2010

What is Bankruptcy?

Impact of bankruptcy on debtor

Types of bankruptcy

Thinking about Filing Bankruptcy?

United States Trustee Program

United StatesTrustee Program

Background of theU.S. Trustee Program

Primary Role of theUnited StatesTrustee Program

Principal U.S. Trustee Dutiesunder the Bankruptcy Code

Specific responsibilitiesof the United States Trustees include:

For Further Information:

Credit Repair: How to Help Yourself

Sample Dispute Letter - Credit Report

Bankruptcy Basics

Bankruptcy Blog List

Bankruptcy - Glossary of Legal Terms

The Bankruptcy Process

What is Bankruptcy?

United States

Trustee Program

Background of the

U.S. Trustee Program

Primary Role of the

United States

Trustee Program

Principal U.S. Trustee Duties

under the Bankruptcy Code

Specific responsibilities
of the
United States Trustees include: