A bankruptcy case normally begins by the debtor filing a petition with the federal bankruptcy court. There are federal courts all over the country. State courts are not permitted to hear bankruptcy cases. State courts do not have authority over bankruptcy cases.

Who May File a Bankruptcy Petition and Other Documents?

A petition may be filed by an individual, by a husband and wife together, or by a corporation or other entity. 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.

What Happens After Filing a Bankruptcy Petition?

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

In filing the petition and other related documents, the debtor must be careful to list all creditors. Creditors not listed will not receive notice from the clerk of the bankruptcy court and will not cease collection efforts. In addition, if the bankruptcy court is never told by the debtor of a particular creditor, the bankruptcy court will not likely be able to discharge the debt owed to that creditor, and the debtor may still be responsible for paying that debt after the bankruptcy proceedings have concluded.

Discharge and Reorganization

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. This means that the debtor will no longer be personally liable for repaying the debts.

Like other types of civil cases in both state and federal courts, sometimes there are issues in bankruptcy cases that are not easily resolved. While often times a discharge may be granted without objection, this is not always the case.

When certain issues are disputed there may be discovery requests, which are basically requests for information, there may be settlement discussions, and if settlement discussions are unsuccessful, there may be a trial. Some of these issues that may be disputed may be whether a debt is dischargeable or nondischargeable, whether an asset is owned by the debtor or by someone else, whether property is exempt or nonexempt, etc.