Being in debt can be an overwhelming experience that can feel insurmountable and impossible. But those debt situations can become dire when you are faced with foreclosure, repossession, wage garnishment, eviction or other creditor action. If this is the situation you find yourself in, you might want to consider filing an emergency bankruptcy filing.
Why Choose Emergency Bankruptcy?
When you file for bankruptcy, an automatic stay is placed on your property and on your legal standing. An automatic stay is a legal injunction that stops creditors from being able to seize your property or take legal action against you. This means they cannot repossess your car, foreclose on your house, or garnish your wages. An automatic stay can also help if you are being sued by your creditors because it can, in some cases, stop the lawsuit. It can also stop creditors from harassing you. This means they are no longer able to send past due notifications or continue to call you asking for repayment. During an automatic stay you have the time to determine next steps on how you will move forward financially. An automatic stay is crucial to you being able to figure out your debt situation.
Emergency bankruptcy is also helpful if you need more time to put together formal “standard” bankruptcy forms because not all of the paperwork required in filing for bankruptcy needs to be included when filing for emergency bankruptcy.
Timing of Automatic Stay
An automatic stay goes into effect immediately after you file for bankruptcy. This is why it’s so helpful in dire situations when your house is about to be foreclosed on, or a debtor tries to collect payment from you, or your car is about to be repossessed. You can stop that process from happening as soon as you file your emergency bankruptcy. During that bankruptcy period you will need to work with an attorney to help figure out next steps to reconcile your debt.
Exceptions to Automatic Stay
There are exceptions to automatic stays. An automatic stay will not stop every type of collection, and it also does not apply to every situation. You need to be well versed on these exceptions before you file because these actions will continue regardless of the fact you’ve filed for bankruptcy. That means that even if you have filed for bankruptcy or emergency bankruptcy, you will still need to either make payments, or continue with certain kinds of legal action. An automatic stay does not mean an automatic break from these responsibilities or legal actions.
The following are not protected or halted under an automatic stay:
Divorce and Child Support:
- child support and alimony payments will still need to be paid
- being able to collect back child support and alimony from property that is not part of the bankruptcy estate
- actions to determine child custody and visitation
- actions to establish paternity
- actions for modifying child support and alimony
- actions to legally protect a spouse or child from domestic violence
- withholding income or garnishing wages for the collection of child support
- the reporting of overdue support to credit bureaus
- interception of tax refunds to pay back child support, and
- the withholding, suspension, or restriction of a drivers’ and/or professional license as leverage to collect child support.
The IRS will still be able to continue certain actions, including:
- tax audits
- the issuing of a tax deficiency notice
- demanding tax returns
- issuing tax assessments
- demanding payment for an assessment
An automatic stay does not prevent a debtor’s income from being eligible for withholding in order to repay a loan from an ERISA-qualified pension. This type of pension includes most job-related pensions as well as individual retirement plans.
There are also ways that you can lose the protection offered during an automatic stay.
Losing the Protection of an Automatic Stay
Don’t assume that once you get an automatic stay, you are in the clear. There are still things you will need to stay aware and in control of. You can lose the protection if one of the following apply:
- you had a bankruptcy case already pending within the year before you file your current case. In this case the court can refuse your request to allow the stay to kick in.
- you do not adhere to the deadlines set out in the bankruptcy code. These deadlines are set for dealing with property that is used as collateral for a secured debt.
While an automatic stay will typically stop a pending eviction, there are two exceptions:
- Your landlord obtained a judgment for possession prior to your bankruptcy filing. Some states will allow for your stay to be reinstated if the judgment was due to the fact you were unable to pay rent.
- The landlord is evicting you because you endangered the property or illegally used a controlled substance while on the property.
Last Note: Creditors are also allowed to request that the bankruptcy court remove the automatic stay. In these cases, the court often grants the creditors the ability to proceed with their actions against you.
Deciding on Bankruptcy
Filing for bankruptcy (either emergency or standard) can provide a way to clear your debt while also giving you a fresh start. But many factors need to be considered before you decide to go through with bankruptcy. It’s not something that should be entered into lightly. It can impact your credit score and other aspects of your life for a long period of time, and should not be seen as a “get out of debt quickly” option.
Before you consider bankruptcy, evaluate your options. Considering working with a bankruptcy attorney to assess your situation. What are the types of debt you have and what are your goals when it comes to that debt? Remember that a bankruptcy filing will not eliminate certain forms a debt. If that’s the debt that you are dealing with, then know that bankruptcy will not help you.
It’s important to remember that many creditors will work with you to settle debt. They are often very willing to work with you on repayment plans that would allow you to avoid filing for bankruptcy.
Qualifying for Bankruptcy
If you do decide that bankruptcy is the option you’re going to take, you will need to determine if you are eligible.
You will also need to understand the type of bankruptcy you are filing.
Chapter 7: This is also called liquidation bankruptcy. In Chapter 7 bankruptcy, a bankruptcy trustee cancels many (or all) of your debts. Some of these debts can also be liquidated (or sold) to repay creditors. To qualify, your income must be low enough to pass a standard bankruptcy means test.
Chapter 13: This is also called reorganization bankruptcy. In Chapter 13 bankruptcy, you are able to keep your property, but you reorganize your debt in order to pay back all, or a portion, of your debt over a three to five-year period. To qualify, your amount of debt cannot exceed certain dollar limits.
Choosing Chapter 7 or Chapter 13 Bankruptcy
The type of bankruptcy you file, either Chapter 7 or Chapter 13 bankruptcy, depends on numerous circumstances, including:
- types of debt you have
- your income and expenses
- whether you own nonexempt property
- goals you wish to achieve through filing
Once you determine these things, you should work with a bankruptcy attorney to determine next steps. You will also want to look at your timing, and what debts are coming due (if they are not already post due). You might decide that you need to file an emergency bankruptcy.
Steps for Emergency Bankruptcy Filing
For an emergency filing, follow these steps:
Step 1: Check with your local bankruptcy court to find out what forms must be submitted for an emergency filing. A bankruptcy attorney will also be able to advise you on these forms.
Step 2: Fill in Form 1-Voluntary Petition, including Exhibit D.
Step 3: List all your creditors, including: collection agencies and others who are seeking to collect debts from you.
Step 4: Fill in the Statement of Social Security Number and any other papers the court requires.
Step 5: File the originals along with the required number of copies, accompanied by your fee (or an Application for Payment of Fee in Installments), in addition to a self-addressed envelope with the bankruptcy court. Make and keep copies of everything for your records.
Step 6: File all other required forms within 14 days. You must do this within 14 days, or else you run the risk of your case being dismissed.
Working with a Bankruptcy Attorney
Facing debt can be overwhelming. The bills can continue to pile up and the creditors can continue to harass you unless you take responsibility and take action. Working with a bankruptcy attorney to guide you through the process of debt consolidation and/or bankruptcy is the first step to getting back on to solid financial footing. The laws regarding bankruptcy can also be confusing. Contact us today if you need help. Our attorneys understand the frustrations that can come with trying to understand bankruptcy laws. We welcome the opportunity to speak with you about your specific situation.