How Challenging Can Your Bankruptcy Petition Be?

Law Blog

If you've never been through the bankruptcy process, you likely want to know how challenging it might be. A bankruptcy attorney won't be able to give you a clear answer, though, until they've had a look at the specifics of your case. These three considerations tend to come into play.

Kind of Bankruptcy Petition

Bankruptcies fall into two broad categories. There are liquidation cases where the court sells the petitioner's non-exempt assets to pay creditors before discharging any unpaid debts. Likewise, there are restructuring cases where petitioners offer to pay a reduced amount according to a submitted plan.

The liquidation process tends to be simpler because qualification is usually more straightforward. Anyone who makes less than half their state's median income is likely to meet the financial requirements. If you don't meet the financial criteria, though, you may still be able to file by showing your situation justifies due to a large debt load.

Arranging a payment plan is typically more complex. You have to propose a payment plan, and then the court will consider it. Creditors can also file objections, although this is usually less of an issue in personal bankruptcies.

Recent Bankruptcy Filings

If you've filed for bankruptcy in the last few years and received a discharge of debts, the law may limit you from filing again too soon. There are many different combinations of filings and limits so it's best to explain your situation to a bankruptcy lawyer. They can review the previous filings and what you're thinking about filing to decide if a court would consider the new case. In the worst-case scenario, you may have to wait up to 8 years from the previous filing date to submit a new case.

Seeking Exemptions

This is almost exclusively a liquidation issue. However, the nature of the exemptions someone is seeking may lead to some questions. You can only ask to keep exempt assets in liquidation. A typical exempt asset is something you need, such as clothing, a vehicle for commuting to work, furniture, dinnerware, and so on.

Some states allow additional exemptions, including cash up to a certain amount. However, talk with a bankruptcy lawyer about the rules in your state before you file.

Where this issue can get sticky is if the court or a creditor questions the nature of the exemption. For example, an electrical contractor might seek an exemption for their truck. If a creditor believes the person is not currently working as a contractor, they might petition the court to not provide the exemption. The judge would then decide how to treat the asset.

To learn more, contact a representative like Harold S. Entes Esq.


11 April 2022