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BANKRUPTCY RESOURCES
YOUR OFFICIAL GUIDE TO BANKRUPTCY FILINGS

INTRODUCTION
National LawForms is committed to developing strong partnerships with industry leaders within the legal community, legal associations & legal professionals to deliver quality legal software products. In this section we attempt to provide a comprehensive database of helpful bankruptcy articles and other resources which compliment our Bankruptcy Case software package. View answers to the most common questions about filing bankrupcty.
Terms of Use

We sell Bankruptcy Case Software which automates preparation and printing of debtor filings under Chapters 7, 11, 13.  Electronic filing is a breeze!  We have the best software on the market.


BASICS

Bankruptcy Basics
Bankruptcy Statistics
Glossary of Bankruptcy Terms
A History of Bankruptcy in the United States
Electronic Case File/Case Management (ECF/CM)
Public Access to Court Electronic Records (PACER)

NOTEWORTHY

FREE Chapter 13 Repayment Plan Calculator
Manditory Form Changes

OTHER LINKS

Local Bar Associations
State Bar Associations
Chapter 13 Standing Trustees

   
 

TERMS OF USE:
Resources in this section are provided AS-IS and may not be suitable for the purposes intended. Questions relating to article content or application should be discussed with a qualified professional. No tax, legal, financial, investment or similar advice is provided herein. National LawForms, Inc. makes no representation or warranty as to suitability of use or accuracy of content. Further, National LawForms, Inc. disclaims any other warranties, express or implied, including but not limited to the warranties of merchantability or fitness for the intended purpose or use. By using he information provided on this page, you are accepting these terms.


BANKRUPTCY BASICS:
Certain basic concepts apply under both Chapter 7 and Chapter 13. The case is commenced by filing a petition with the bankruptcy court. The petition must list all of your assets, liabilities and other information required under the code. You cannot pick and choose which creditors to include on the petition, but that doesn't mean you cannot keep your home or vehicle, as will be explained later. All creditors must be listed. You may file as an individual or as husband and wife. Married couples do not have to file together if substantially all debts are solely in one spouse's name.

Your creditors can force you into bankruptcy. This is called an involuntary proceeding. For the most part, involuntary proceedings are confined to business cases. Almost all consumer cases are filed voluntarily. The filing of the petition invokes what is known as the automatic stay. This means that your creditors are immediately prevented from doing anything further to compel collection of a debt. The harassing calls, garnishments, law suits, foreclosures, repossessions or shutting off of utility services are all stopped. The "stay" is designed to give you time to sort out your affairs free from the harassment of creditors. In the petition, your debts are classified as either priority, secured or unsecured. Each is treated differently depending on which chapter is filed.  Priority debts in consumer cases are usually limited to government tax liabilities and support obligations. Priority creditors have certain rights to payment over other creditors. Secured debts are backed by property known as collateral, and typically consist of auto loans and mortgages. The creditor has a lien, or right to recover the property upon default. In most cases, liens attach to property by virtue of a written security agreement signed when the pledged property is purchased, or upon obtaining a loan.Unsecured debts are almost everything else. They include credit cards, back utilities, medical bills, store charges and unsecured loans. Unsecured creditors do not have a lien or interest in your property. If you purchased certain property with a store charge or credit card, the seller cannot repossess that property on your default without a security agreement.

Bankruptcy is intended to be a last alternative. other options include: consolidation loans to reduce high interest payments and allow for easier repayment terms. Consolidation doesn't help, however, if the source of the problem is too little income for too much debt.

The Consumer Credit Counseling Service in your area can also be considered. For a nominal fee, they will attempt to formulate a repayment schedule with your creditors. Some creditors will forego further accrual of interest charges as long as you comply with the repayment schedule. The Consumer Credit Counseling Service is a non-profit organization which is partially funded by large institutional creditors. It should be considered when you have enough disposable income to pay your total debt within three and a half years, but cannot get the cooperation of creditors to accept minimum payments.


BANKRUPTCY STATISTICS
The Administrative Office of the Courts provides newsletters, reports and statistics on debtor filings within the United States.  We visit the site often, study the reports, and re-write this public information for our customers.

Fiscal Year 2003 saw the number of personal bankruptcies filed in federal court continue to increase, while business bankruptcy filings declined.

There were 1,661,996 bankruptcies filed in Fiscal Year 2003, up 7.4 percent from the 1,547,669 filings in Fiscal Year 2002. This is the highest-ever total of filings for any reporting period. Since 1994, when filings totaled 837,797, bankruptcies in federal courts have increased 98 percent.

Business bankruptcies fell 7.4 percent to 36,183 in Fiscal Year 2003, down from 39,091 in Fiscal Year 2002.

Business and Non-business Filings
(Years Ended September 30, 1999-2003)
Statistics are from the Administrative Office of the Courts

  Year Total Non-Business Business
  2003 1,661,996 1,625,813 36,183
  2002 1,547,669 1,508,578 39,091
  2001 1,437,354 1,398,864 38,490
  2000 1,262,102 1,226,037 36,065
  1999 1,354,376 1,315,751 38,625

BANKRUPTCY PROFILES

average age: 38;
44% of filers are couples;
30% are women filing alone;
26% are men filing alone;
Two out of three have lost a job;
Half have experienced a serious health problem;
Highest bankruptcy rates: Tennessee, Utah, Georgia, Alabama.

Source: The Fragile Middle Class: Americans in Debt;
Elizabeth Warren, Harvard Law School; Smith Business Solutions

K-MART TOPS U.S. RETAIL BANKRUPTCIES LIST
Kmart Corp. is the biggest U.S. retailer to declare bankruptcy, according to data going back to 1980, with total pre-bankruptcy assets of more than $17 billion, Reuters reported. The following list ranks the 10 largest U.S. retail bankruptcies since 1980, by total assets before bankruptcy, based on figures from BankruptcyData.com:

 
COMPANY
(Note: Ames Department Stores are included twice as they filed twice)
BANK.
DATE
TOT. ASSETS PRE-BANK. ($MIL)
  Kmart
1/22/2002
$17,007.00
  Federated Dept. Stores
1/15/1990
$7,913.00
  Montgomery Ward Holding Corp.
7/7/1997
$4,879.00
  Macy (R.H.) & Co. Inc.
1/27/1992
$4,812.00
  Allied Stores Corp.
1/15/1990
$3,502.00
  Southland Corp.
10/24/1990
$3,439.00
  Ames Department Stores
4/25/1990
$2,130.00
  The Circle K Corp.
5/15/1990
$2,045.00
  Carter Hawley Hale Stores
2/11/1991
$2,045.00
  Ames Department Stores Inc.
8/20/2001
$1,975.29
  Revco D.S. Inc.
7/28/1988
$1,844.00


A HISTORY OF BANKRUPTCY IN THE UNITED STATES
From the Pages of The 2001 Bankruptcy Yearbook and Almanac

In medieval Italy, when a businessman did not pay his debts, it was the practice to destroy his trading bench. From the Italian for broken bench, "banca rotta," comes the term bankruptcy.

Before the 20th century, rules and practices concerning bankruptcy generally favored the creditor and were very harsh toward the bankrupt. The focus was on recovering the investments of the creditors and almost all bankruptcies at this time were involuntary. In England, the first official laws concerning bankruptcy were passed in 1542, under Henry VIII. A bankrupt individual was considered a criminal and was subject to criminal punishment. Potential punishments ranged from incarceration in debtors prison to the death penalty.

In the United States, early federal bankruptcy laws were temporary responses to bad economic conditions. The first official bankruptcy law was enacted in 1800 in response to land speculation. It was repealed in 1803. Similarly, in 1841, in response to the panic of 1837, the second bankruptcy law was passed. It was repealed in 1843. The economic upheaval of the Civil War caused Congress to pass another bankruptcy law in 1867. That law was repealed in 1878. All of these laws contained some allowance for discharge of unpaid debts. The first two laws, those of 1800 and 1841, allowed only minimal discharge of debt. The 1867 law was the first to include protection for corporations.

Modern bankruptcy laws and practices in the United States emphasize rehabilitating (reorganizing) debtors in distress. The Bankruptcy Act of 1898 was the first to give companies in distress an option of being protected from creditors. The company could be put in an "equity receivership." This reorganization provision was made much more formal and extensive in the United States during the 1930s. The economic upheaval of the Great Depression yielded much bankruptcy legislation, in particular, the Bankruptcy Act of 1933 and the Bankruptcy Act of 1934. This legislation culminated with the Chandler Act of 1938. This included substantial provisions for reorganization of businesses.

During the period from World War II through the 1970s, bankruptcy was not a major topic in the news. With the exception of railroads, there were not many notable business failures in the U.S. During the 1970s, there were only two corporate bankruptcies of prominence, Penn Central Transportation Corporation in 1970 and W.T. Grant Company in 1975.

The Bankruptcy Reform Act of 1978 was passed in 1978 and took effect on October 1, 1979. This act substantially revamped bankruptcy practices. A strong business reorganization Chapter was created, Chapter 11. (This replaced the old Chapters X, XI and XII that had been created by the 1898 Act and amended by the Chandler Act.) Similarly, a more powerful personal bankruptcy, Chapter 13, replaced the old Chapter XIII. In general, the Reform Act of 1978 made it easier for both businesses and individuals to file a bankruptcy and to reorganize.

The 1978 Act, a major piece of legislation, started a number of legal controversies and many amendments and judicial clarifications of the 1978 Act were made during the 1980s. One pivotal event was a 1982 Supreme Court ruling that the bankruptcy court's enlarged jurisdiction, which was established by the 1978 Act, was unconstitutional. In layman's terms, the Supreme Court ruling stated that bankruptcy judges had been given too much power by Congress and their duties overlapped with those of other branches of the government. The 1982 ruling led to the Bankruptcy Amendment Act of 1984.

There were a number of other notable developments in bankruptcy rules during the 1980s. The 1978 Act did not cover tax related issues and this was addressed by the Bankruptcy Tax Act of 1980. The Tax Act clarified such things as tax loss carry-forwards and taxation rules when there is an exchange of equity for debt. A 1983 Supreme Court ruling challenged the ease with which companies could protect themselves from labor contracts while in bankruptcy. The Bankruptcy Amendment Act of 1984 limited the right of companies to terminate labor contracts. In 1986, Chapter 12 was created for family farms.

During the 1980s and early 1990s record numbers of bankruptcies, of all types, were filed. Many well known companies filed for bankruptcy, primarily Chapter 11 reorganization. Included were LTV, Eastern Airlines, Texaco, Continental Airlines, Allied Stores, Federated Department Stores, Greyhound, R.H. Macy and Pan Am. Several of these large cases, such as Maxwell Communication and Olympia & York, had the added complexity of involving the insolvency rules of several different countries. These massive bankruptcies created challenges for the court system, but the system appears to have handled the challenge well.

New techniques, such as "prepackaged" and "pre-arranged" bankruptcies, allowed the court system to handle the increased caseload of the late 1980s and early 1990s fairly efficiently. However, there still remain substantial concerns about the level of professional fees and apparent waste of corporate assets in a number of bankruptcy cases. Recent initiatives to deal with these issues include the "fast track" approach to small and medium sized Chapter 11 cases being used in several districts.

On October 22, 1994, the Bankruptcy Reform Act of 1994 (Public Law 103-394, October 22, 1994), the most comprehensive piece of bankruptcy legislation since the 1978 Act, was signed into law by President Clinton. The 1994 Act contains many provisions, for both business and consumer bankruptcy, including: provisions to expedite bankruptcy proceedings; provisions to encourage individual debtors to use Chapter 13 to reschedule their debts rather than use Chapter 7 to liquidate; provisions to aid creditors in recovering claims against bankrupt estates; creation of a National Bankruptcy Commission to investigate further changes in bankruptcy law; etc. In November 1997, the National Bankruptcy Review Commission completed an extensive and detailed report on bankruptcy reform.


GLOSSARY OF BANKRUPTCY TERMS:
ACCELERATION CLAUSE
A provision in a contract which allows a creditor the right to immediately demand repayment of the entire amount of a debt upon a debtor's default.

ADVERSARY PROCEEDING
An action brought in the bankruptcy court primarily to determine the dischargeability of a specific debt, or objecting to the discharge of all debts.

ANSWER
A document issued by the defendant in a law suit stating the legal defenses to the plaintiff's summons and complaint.

AUTOMATIC STAY
The law which takes effect immediately upon the filing of a bankruptcy petition prohibiting creditors from taking any action to compel collection of a debt.

BANKRUPTCY
A condition where a debtor cannot pay debts now or as they become due, and uses the protection of the law to reorganize their financial affairs by liquidating certain property or formulating a repayment plan.

BANKRUPTCY CODE
Federal laws which govern bankruptcy proceedings.

BANKRUPTCY ESTATE
The property of a debtor which comes under the jurisdiction of the bankruptcy court and trustee when filing for protection under the Bankruptcy Code.

COLLATERAL
Property which is pledged as security for the repayment of a debt.

CONVERSION
The procedure for switching a case from one chapter to another under the Bankruptcy Code.

CREDITOR
One who is owed a debt under a legal obligation or promise.

CREDITORS MEETING
A meeting required under Section 341 of the Bankruptcy Code, conducted by the trustee, and where the debtor can be examined concerning assets, finances or improper conduct having a bearing on the case.

CREDITOR REPORTING AGENCY
A private agency, such as TRW or Equifax, primarily engaged in the operation of keeping and reporting certain financial information about people to various lenders and other subscribers.

DEBTOR
One who owes a debt.

DEFAULT
A failure to perform a legal obligation imposed by law or contract.

DEFICIENCY
The unpaid balance of a secured debt after a creditor has repossessed and sold the collateral, and applied the proceeds towards the debt owed.

DISCHARGE
The cancellation of a legal obligation or debt.

DISCHARGE ORDER
An order issued by a bankruptcy court judge directing that a debtor is no longer legally responsible for certain debts.

EQUITY
The value of property to its owner after all liens and encumbrances are satisfied and the costs of sale paid.

EXECUTION
The legal process of enforcing a judgment by seizing and selling property of a debtor.

EXEMPTION
A state or federal law which allows a debtor to retain certain property from a trustee or creditor so that a debtor is left with the basic necessities of life.

FORECLOSURE
A forced sale of real estate by a creditor to satisfy a defaulted mortgage, delinquent property taxes or a judgment.

GARNISHMENT
A legal process where a debtor's property under another persons control can be taken and applied as payment towards a debt.

HARDSHIP DISCHARGE
A special discharge granted by a bankruptcy court judge for certain debts, not normally dischargeable, under a finding of compelling circumstances which would make repayment of the debt an "undue hardship".

HOMESTEAD EXEMPTION
An exemption allowed a debtor for a certain amount of equity in the debtor's principle residence. New York debtors are allowed to exempt up to $10,000 of equity, or $20,000 where a husband and wife own the property jointly.

JUDGMENT
The legal outcome resulting from a court action determining that a liability does or does not exist.

JUDGMENT CREDITOR
A creditor who has obtained a judgment in its favor and can now enforce the judgment by execution on property.

JUDGMENT DEBTOR
A person who has a judgment for money damages taken against them for an unsatisfied debt.

JUDGMENT LIEN
A lien which attaches to real estate owned by the debtor when a creditor files a judgment with the county clerk's office where the property is located.

LIEN
A legal interest in collateral which allows a creditor to take and sell the collateral should the debtor default. See also security interest.

PRIORITY DEBT
Debts which have a special legal status entitling them to be paid ahead of secured and unsecured debts after property is liquidated in bankruptcy.

MORTGAGE
A lien on real estate.

PERSONAL PROPERTY
Movable property, also known as chattels. Also includes intangible property such as stocks, bonds or other securities.

PROOF OF CLAIM
A document a creditor must file with the bankruptcy court in order to receive payment on their claim.

PURCHASE MONEY SECURITY INTEREST (PMSI)
A lien created when a loan or credit is specifically given to the debtor for the purchase of the item taken as collateral.

REAFFIRMATION AGREEMENT
A written agreement which legally re-obligates a debtor to pay a debt after bankruptcy. Usually given in exchange for allowing the debtor to keep collateral or obtain some other benefit from the creditor.

REAFFIRMATION HEARING
A procedure no longer required under the bankruptcy code to validate reaffirmation agreements and protect debtors by ensuring that they understand their rights and obligations under the new agreement.

REAL PROPERTY
Land, real estate.

REDEMPTION
The right of a debtor to regain title to property under a pending foreclosure proceeding by paying the judgment before sale; or a payment to creditor for the return of property taken, under a pending legal action such as repossession or replevin.

SECURED DEBT
A debt subject to a security interest.

SECURITY AGREEMENT
A written document which creates or provides for a security interest in collateral.

SECURITY INTEREST
See lien.

SUMMONS AND COMPLAINT
Documents used to begin a civil court action to collect a debt.

TRUSTEE
An individual, usually a local attorney, appointed to represent creditors in a bankruptcy proceeding, and responsible for administering the liquidation of assets in Chapter 7, or disbursing payments to creditors under a Chapter 13 Plan.

UNSECURED DEBT
A debt not subject to a security agreement.


 

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