A bankruptcy case normally begins by the debtor filing a petition with the bankruptcy court. A petition may be filed by an individual, by a husband and wife together, or by a corporation or other entity.

Statements Filed by the Debtor

The debtor is also required to file statements listing assets, income, liabilities, and the names and addresses of all creditors and how much they are owed.

The clerk of the bankruptcy court will use this list of creditors when sending important, required notices to creditors. It is the debtor’s responsibility to include all creditors in this list. There may be dire consequences to the debtor who fails to list certain creditors including a bankruptcy court refusing to discharge the debt owed to that creditor.

Automatic Stay

The filing of the petition automatically prevents, or “stays” debt collection actions against the debtor and the debtor’s property. As long as the stay remains in effect, creditors cannot bring or continue lawsuits, make wage garnishments, or even make telephone calls demanding payment.

Creditor Response to the Petition

Creditors receive notice from the clerk of court that the debtor has filed a bankruptcy petition.

Some bankruptcy cases are filed to allow a debtor to reorganize and establish a plan to repay creditors, while other cases involve liquidation of the debtor’s property. In many bankruptcy cases involving liquidation of the property of individual consumers, there is little or no money available from the debtor’s estate to pay creditors. As a result, in these cases, there are few issues or disputes, and the debtor is normally granted a “discharge” of most debts without objection.

When a creditor does wish to dispute discharge of debt owed to the creditor, the creditor may do so. Upon the creditor filing the proper document, an adversary proceeding begins.

Which Debts May be Discharged?

Certain debt is not dischargeable under bankruptcy laws. The determination as to what debts the law should allow to be discharged and what debts the law should not allow to be discharged was largely based on public policy. Tax obligations to the Internal Revenue Service, government student loans, child support obligations, spousal support obligations, and debt incurred fraudulently are all examples of debt that is generally non-dischargeable. Credit card debt is an example of debt that is generally dischargeable through bankruptcy proceedings.

Ultimately, the bankruptcy court determines what debt will be discharged. The clerk of the bankruptcy court will give notice of discharge to creditors, which permanently prohibits creditors from attempting to collect discharged debts through any means of contact with the debtor.