For many people, bankruptcy is always an emergency situation. It’s the option to pursue when you don’t see any other way out of debt. But, everyone’s situation is different, which is part of the reason why there are different types of bankruptcies, such as Chapter 7 and Chapter 13. The speed at which a person needs the bankruptcy to take effect also varies. While one person might not need the automatic stay immediately, another might need it right away. In the latter case, filing only the minimum paperwork needed, at least initially, might be a person’s best option.
What’s an emergency?
Typically, an emergency situation is one that involves a loss if a person doesn’t take action right away. For example, a person might be on the edge of foreclosure or might be behind on car loan payments, meaning that the lender is about to repossess the vehicle. In other cases, a person might be facing wage garnishment if he or she doesn’t act quickly.
When you file for bankruptcy, the automatic stay kicks in. The stay prevents your creditors from coming after your debt, garnishing your wages or repossessing your property. It goes into effect as soon as you file. In the case of an emergency filing, the automatic stay becomes effective, even though you haven’t filed all of your paperwork yet.
What can you do?
The paperwork required when filing an emergency bankruptcy is the same whether you are filing for Chapter 7 or Chapter 13. On the day you file, you’ll need to submit the voluntary petition, or Form B1. Although the voluntary petition is the bare minimum you need to file, a number of other forms are due within seven days of filing. If you don’t file those forms on the first day, the court will issue you a notice of deficiency.
Pre-filing credit counseling is a requirement, even in an emergency. You can submit Exhibit D, a certificate or other proof that you’ve completed the counseling session with your voluntary petition. If you haven’t completed the counseling on the day you file, you have seven days to submit Exhibit D.
The same is true of what’s called the mailing matrix, or the list of your creditors. The list is due seven days after you submit the voluntary petition. Since the bankruptcy court uses the list to inform creditors of your filing and to keep them from contacting you, the sooner you file it, the better. You also need to submit your filing fee and a statement of Social Security number within seven days.
After the Emergency
Once the automatic stay goes into effect and you’ve submitted the initial, bare minimum paperwork, you’re not off of the hook yet. Your case can be dismissed if you don’t file the rest of the required forms and paperwork within 14 days of the initial filing. If it is dismissed, you’ll need to wait another 180 days before you file again.
All bankruptcies can seem like an emergency. If you want to know if you are really in an emergency situation and the best way to handle it, we can help. Contact us today to learn more about pre-filing counseling and what you need to do when you are considering filing for bankruptcy.
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
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