NATIONAL
DIVORCE & BANKRUPTCY CENTER
Now In Our 14th Year!
Debtors get much needed 'breathing room' and discharge or reorganize
(chapter 13):
Bankruptcy Reform Act of 1994:
House Report No. 103-835
(October 4,5,1994)
***Note: The following is a reprint of sections
of House Report No. 103-835 P.L. 103-394
; Congressional Record Vol. 140 (1994) unless otherwise
noted; (With emphasis added for clarity and ease of reading).
The entire text is available at any public library.
" The legacy of runaway debt and rampant financial
speculation in the 1980's is a massive increase in bankruptcy filings in
the 1990's."
"The uniform national bankruptcy system is designed to
achieve two equally important objectives.
The first is to provide honest
debtors who have fallen on hard times the opportunity for a fresh start in
life, after they have made a good-faith attempt to pay what they can.
This not only helps honest debtors from being relegated to a
lifetime of destitution or the functional equivalent of financial indentured
servitude from which they can never hope to recover, but also helps reinforce the incentives for
healthy business entrepreneurship, which are the lifeblood of economic growth in
a free market system.
The second objective of the
bankruptcy system is to protect creditors in general by preventing an insolvent
debtor from selectively paying off the claims of certain favored creditors at
the expense of others. Because the essence of insolvency is that there is
not enough money to pay all claims in full, there is an inevitable temptation
among creditors to compete fiercely over the debtor's limited funds. The bankruptcy system is thus designed to enforce a distribution
of the debtor's assets in an orderly manner in which claims of all creditors are considered fairly, in
accordance with established principles rather than on the basis of the inside
influence or economic leverage of a particular creditor.
" The bankruptcy system accomplishes these goals
through several mechanisms. The filing of a bankruptcy
petition - by a debtor or, in some situations, by a group of creditors,
triggers an "automatic stay" of pending actions against
the debtor by creditors to recover claims." The
automatic stay immediately stops creditors from
trying to collect from the debtor [i.e. stops foreclosure
sales, repossessions, judgments, garnishment proceedings
etc.].
"In a chapter 7 liquidation case, except for certain
personal and family property that the
debtor is permitted to retain
, the non-exempt property of a debtor (if any) is
transferred to the bankruptcy estate and sold for the benefit of the creditors."
"A narrow
set of specified types of claims are "nondischargeable" in bankruptcy,
which means that they remain owed to the
creditor to the full extent unpaid. Those claims (such as claims relating
to fraud, or claims for restitution to victims of crime) fail to meet the
bankruptcy objective of giving a fresh start only to honest
debtors or are considered to be of paramount societal importance (such as
tax obligations, and alimony and child support). " (See Dischargeable
Debts
)
"This section is intended to provide greater
protection for alimony, maintenance, and support obligations owing to a spouse,
former spouse or child of a debtor in bankruptcy. The Committee believes
that a debtor should not use the protection of a bankruptcy filing in order
to avoid legitimate marital and child support obligations."(House
Report No. 103-835; Section 304)
Consumer debt to acquire
"luxury goods or services" and cash advances under an open end credit plan,
in the amount of $1,500, within the 60 day period prior to filing bankruptcy may be presumed nondischargeable
. (House Report No. 103-835; Section
306)
"Protection against discriminatory treatment of
applications for student loans." This section
clarifies the anitdiscrimination
provisions of the Bankruptcy Code to
ensure that applicants for student loans
or grants are not denied those benefits
due to a prior bankruptcy....Under this section, as under section 525 generally,
a debtor should not be treated differently
based solely on the fact that the debtor
once owed a student loan which was not paid because it was discharged;
the debtor should be treated the same as
if the prior student loan had never
existed."
(House Report No. 103-835; Section 313)
[*Student loans, are not generally
dischargeable
, except for loans where
the payments first became due more than seven years ago (adding in any
time you received a deferment or forbearance or were in a previous
bankruptcy). In rare cases, a bankruptcy judge may permit a discharge
of student loan debt if (and only if) paying the loans would cause you undue
hardship.2] (See Student
Loans)
Who Can File Bankruptcy?
The bankruptcy code states that any individual who
lives, has property in, or a place of business in the United States may file
bankruptcy in the United States.
Unsecured Debts
"Unsecured
debts consist of any debts that are not secured
. Anyone owed an unsecured debt is an unsecured creditor. All
unsecured debts you owe at the time you file will be wiped out in bankruptcy
unless they are nondischargeable."3
"This section requires the U.S. Trustee to orally examine the debtor to ensure
that he or she is informed about the effects of bankruptcy....Its purpose is solely informational; it is not intended to be an
interrogation
to which the
debtor must give any specific answers or which could be used against the debtor
in some later proceeding. ..."
"The trustee
conducting the meeting of the creditors is directed to orally inquire whether
the debtor is aware of the consequences of bankruptcy, including protections
such as those provided by the discharge and the automatic stay, as well as the
fact that bankruptcy will appear on the debtor's credit history."
Approximately a month after you file for bankruptcy, you'll go to
court for a creditors meeting , so
named because creditors are invited to attend, although
very few creditors actually
attend the meeting. Most creditor's meetings last about 5 - 15
minutes.4
"...some creditors may treat the debtor more favorably
after bankruptcy has removed all other debts, and many creditors consider
a bankruptcy filing a barrier to new credit only if it
occurred in the 2 or 3 years
prior to the credit application." (House Report No. 103-835; Section 115)
"Finally, the trustee must make sure the debtor is aware of
the effect of reaffirming a debt
. Since section 103 of the bill
eliminates for most debtors the warnings and explanations concerning
reaffirmation previously given by the court at the discharge hearing, it
is important that trustees explain not only the procedures for reaffirmation,
but also the potential risks of reaffirmation and the fact that the
debtor may voluntarily choose to repay any debt to a
creditor without reaffirming the debt, as provided in Bankruptcy Code
section 524(f)." (House Report
No. 103-835; Section 115)
"...In chapter 13, which applies only to individuals with regular income
, a payment plan is
proposed by the debtor, reviewed by the creditors, and approved by the court.
For a period of 3-5 years the debtor is required to pay all
income - other than what is needed for support of the debtor and his dependents
- to a trustee, who distributes the money to creditors
according to the plan...."
Work-Sheet
Just point - click - print!
1.How To File For Bankruptcy; Nolo Press Berkeley; 10th
Edition; 1998; Elias, Renauer, Leonard.
2. Personal Bankruptcy; Nolo Press Berkeley; 1st Edition; 1997; Elias, Renauer,
Leonard
3. ibid.
4. ibid.
5. ibid.
FILING BANKRUPTCY IMMEDIATELY STOPS: 
Alternate order form
e-mail a physical address
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