Bankruptcy Court Procedures

Bankruptcy courts are civil courts in which people who can no longer pay their bills seek relief from creditors. A bankruptcy court may liquidate assets in order to pay off debts, create payment plans which make it easier for people to pay, or dismiss obligations to certain creditors in some instances.

Bankruptcies cannot be filed in state court; they can only be filed in one of the 94 federal judicial districts which handle bankruptcy matters. The United States judiciary is responsible for bankruptcy cases, and they strongly recommend that you hire a qualified attorney before proceeding with filing any documents. There are many complex documents which must be filed correctly or the bankruptcy judge may dismiss the case.

How Bankruptcy Courts Work

All people who file for bankruptcy must attend mandatory credit counseling through an approved agency. This credit counseling must occur before the first petition is filed.

After that, the lawyer (or the person, if he or she chooses to not hire a lawyer) files a petition with the court to begin bankruptcy proceedings. At this time, creditors must cease trying to collect the debt for a certain period of time (until the bankruptcy case is decided).

The court will appoint a trustee who looks at all the debts and assets that a person has. This trustee decides which assets must be sold to pay off the debt and how that money will be distributed among the creditors. The trustee is an impartial third party who does not represent either you or your creditors in the bankruptcy case.

Certain property cannot be sold by the trustee. These may include the primary residence of the person filing for bankruptcy and certain vehicles. Each type of bankruptcy (Chapter 7, Chapter 11, and Chapter 13) has its own rules and regulations regarding what property may be kept by the debtor and how assets will be sold and distributed.

Your creditors can file objections once you have met with the trustee and they have heard how your assets will be divided. If objections are filed, the case goes to trial to settle the dispute. If no objections are filed, the bankruptcy judge will issue a discharge. Some states require that you take a financial management course before the discharge can be issued.

Debts That Cannot be Discharged by Bankruptcy Courts

There are certain debts which cannot be completely discharged in a bankruptcy ruling. These include outstanding child support obligations, back taxes, student loans, and other types of debt owed to government agencies. However, these debts may be restructured and the bankruptcy court may set up payment plans so that the debtor can meet these obligations.

Resources

The Federal Judiciary of the United States Courts has an excellent website dedicated to U.S. bankruptcy courts and procedures. Visit

http://www.uscourts.gov/http://www.peoplepublicrecords.org/bankruptcycourts.html

to learn the basic rules and forms which are required in bankruptcy cases.

A PDF document of bankruptcy court rules and procedures is available from the federal government by clicking

http://www.uscourts.gov/bankruptcycourts/bankbasics.pdf

. This is an updated document which accounts for changes made to the bankruptcy code in 2005.