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Bankruptcy Law Information

Bankruptcy law is the group of laws set out in Title 11 of the United States Code of Laws.

You file bankruptcy by filing paperwork called a bankruptcy petition and schedules with the bankruptcy court in the correct district, which is normally in the state where you live. When you file a bankruptcy you are called a Debtor. In the paperwork you tell the bankruptcy court about all of the people you owe (your creditors) and about all of the things you own (your assets). You tell the bankruptcy court about your budget (your monthly income and your monthly expenses).

There are lots of other questions that you have to answer and they are designed to give anyone reading all of the paperwork a clear snapshot of your financial picture. Everything you say has to be complete and is said under penalty of perjury, which makes it a crime not to tell the complete truth. You also have to attach certain documents to the paperwork and provide other information to the court which helps prove what you said in your paperwork. In most districts the paperwork is filed electronically over the internet by the lawyer filing it.

When you file bankruptcy a thing called the automatic stay protects you. The stay is like a legal force field around you and most creditors cannot penetrate it after you file bankruptcy unless (a) they get the bankruptcy court’s permission or (b) the bankruptcy law specifically says that the automatic stay does not apply to them. This means that those affected creditors cannot contact you, sue you, repossess your car, foreclose on your house, file a lien, etc against you.

Usually within about 30 days after you file bankruptcy there is a bankruptcy hearing which you and your attorney must attend. Where it is depends on where you live. In South Carolina, you either go to court in Charleston, Columbia or Spartanburg. This hearing is called the Meeting of Creditors, but it is really the debtor’s hearing. The creditors are invited to attend but usually don’t, although business creditors, ex-spouses and generally ornery people usually attend.

The hearings are tape recorded and the debtor testifies concerning his assets and liabilities and answers any questions he is asked under penalty of perjury. There is no “Pleading the 5th”; you must answer the questions or your case can be dismissed. Usually, the hearings only last a few minutes and are not confrontational. Your lawyer will be there, but cannot sit at your table or testify. Hearings are also referred to as a 341 Meeting.

The hearing date is set by the court based on when you file. The only way you can really control when your hearing is set is by trying to file when they are setting hearings at a time you wish to appear. Otherwise, the time is not negotiable. If you have a medical emergency, you may be able to have your hearing put off, or continued, for one two week interval or, in extreme cases, you may be able to have it done by telephone. This is rarely done.

You must have your social security card and drivers license at your hearing or your hearing will be continued to another date. Also, frequently you will be asked to bring certain documents such as bank statements, tax returns or pay stubs to court and, if you don’t, your case can be continued and you have to come back another day. You have to enter past the U.S. Marshals and through a metal detector to enter the building or room, so be prepared. In case you forgot your manners, CUT OFF YOUR PHONE AND TAKE OFF YOUR HAT BEFORE YOU ENTER. SAY YES, SIR AND NO, SIR, when you are asked a question. Everything is recorded, so you must make a verbal response and not a shrug or grunt. Be on time, early, if possible.

There are several types of bankruptcies, known by their chapters: chapter 7, 9, 11, 12, & 13 bankruptcy. Most people file chapters 7 and 13 bankruptcy. For specific information, go to the section in this website concerning each chapter.

Chapter 7 bankruptcy is a liquidation, where your goal is to discharge, or wipe out, all of your unsecured debts. An unsecured debt is the type of debt where the creditor does not have a lien on any of your assets. Some examples of typical unsecured debt are: credit cards, medical bills, and ordinary bank loans. When a debt is discharged a creditor can never try to collect that debt from you.

Chapter 9 bankruptcy is for the reorganization of cities. Chapter 11 bankruptcy is for the reorganization of corporations or individuals (people) who do not qualify for chapter 13 bankruptcy. Chapter 12 bankruptcy is for the reorganization of Family Farmers and Family Fishermen. Chapter 13 bankruptcy is for the reorganization of individuals. This website will only discuss bankruptcy in the context of chapters 7, 11, and 13 bankruptcy. If your city wants to file bankruptcy feel free to contact me and we will discuss it further. Call me if you are a Family Farmer or Family Fisherman.

Reorganization means that you are asking the court to restructure the payment arrangements and maybe even the amount owed regarding some or all of your debts in a way that is different from that to which you and the bank originally agreed when you signed the loan documents.

The person who runs the hearing and asks the questions is called a bankruptcy panel trustee in chapter 7, chapter 12 and chapter 13 bankruptcy cases. This is because there is a group of people who have been approved by the US Trustee or BA to be trustees in bankruptcy cases and they sit on a panel of trustees who are assigned bankruptcy cases when the cases are filed in a rotation system done by a computer to make sure the cases are fairly assigned. The system also watches for ethical conflicts so that a trustee is not assigned to cases in which he or she has an interest that competes with that of the creditors to whom the trustee is obligated.

Creditors ask questions when the bankruptcy trustee is through. In chapter 11 bankruptcy cases in South Carolina someone from the United States Trustee’s office asks the questions. In fact, the United States Trustee’s office, which is under the U.S. Justice Department, oversees the entire United States Bankruptcy System, except for in the states of Alabama and North Carolina. Sometimes the U.S. Trustee’s office is called the UST. In North Carolina and Alabama they do not have the UST’s office, but they have an entity called the Bankruptcy Administrator, or BA. Its employees pretty much serve the same purpose and role as the UST employees.

What happens after your meeting of creditors depends on what type of bankruptcy you file. Look for specific information and an estimated timetable of events under the section for each chapter.

  • Learn More About Bankruptcy

    If its time to start considering a step toward bankruptcy we're here to help. I have been helping people through the process of filing bankruptcy in South Carolina for over 20 years. We are here for you if you have questions.
  • Download Bankruptcy Guide

    This guide is full of useful information about bankruptcy. It's a large PDF so it may take a few seconds to download.
  • Can I go to Jail for not Paying my Bills?

    No, not unless you committed a crime in the creation of the debt (for example, fraud). Simply borrowing money and not being able to pay it back is not a crime. Many creditors representatives will tell you lies on the telephone and say that they will have you put in jail. Perhaps they are too ignorant to know they are wrong or that it is illegal for them even to say that. See More Bankruptcy Q&A