The Debtor’s Duties and Benefits Under Bankruptcy Law

Filing for bankruptcy can provide much-needed relief for individuals overwhelmed by debt. However, bankruptcy isn’t just about what you gain—it also comes with specific responsibilities. Knowing your duties and benefits as a debtor under bankruptcy law can help you navigate the process smoothly and secure the financial fresh start you need. A Los Angeles bankruptcy attorney can help you understand what you’re required to do as a debtor, the advantages bankruptcy offers, and how fulfilling your obligations can lead to a successful outcome.

Debtor’s Duties in Bankruptcy

When you file for bankruptcy, you must follow specific legal duties and requirements. These responsibilities ensure the bankruptcy process is transparent, fair to all parties involved, and compliant with the U.S. Bankruptcy Code.

1. Accurately Disclose Financial Information

One of your primary duties is to provide complete and accurate information about your financial situation. This includes listing:

• All Debts: You must disclose all your debts, including unsecured debts like credit cards and medical bills, as well as secured debts like mortgages and car loans.
• Assets: You are required to provide a detailed list of all your assets, such as real estate, vehicles, personal property, and financial accounts.
• Income and Expenses: You must include information on all sources of income and provide an accurate record of your monthly expenses.

The bankruptcy court relies on this information to evaluate your financial situation and determine how to proceed. Providing false or incomplete information can lead to the dismissal of your case, penalties, or even criminal charges for fraud.

2. Attend Credit Counseling and Debtor Education

Before you can file for bankruptcy, you must complete a credit counseling session with an approved credit counseling agency. This session is designed to explore potential alternatives to bankruptcy and confirm that filing is the best option for you. After filing, you’re also required to complete a debtor education course to learn better financial management strategies for the future.

Both sessions are mandatory, and failing to complete them can result in the denial of your discharge, meaning you won’t be relieved of your debts.

3. Cooperate with the Bankruptcy Trustee

When you file for bankruptcy, a bankruptcy trustee is appointed to oversee your case. Your duty is to fully cooperate with the trustee by providing requested documents and information promptly. The trustee’s role is to review your financial information, verify your assets and liabilities, and ensure that creditors receive fair treatment.

If you’re filing for Chapter 7, the trustee may liquidate non-exempt assets to pay your creditors. In Chapter 13, the trustee oversees the repayment plan to ensure you’re making the required payments. Cooperating with the trustee is crucial to a successful bankruptcy case.

4. Attend the 341 Meeting (Meeting of Creditors)

All debtors are required to attend a Meeting of Creditors, also known as a 341 meeting. During this meeting, you’ll be asked to confirm your identity and answer questions from the trustee and creditors (if any attend) about your financial situation and bankruptcy petition. While this meeting is typically short and straightforward, it’s an essential part of the bankruptcy process and gives the trustee an opportunity to verify the accuracy of your filings.

5. Make Payments as Required

If you file for Chapter 13 bankruptcy, you’ll need to follow a repayment plan outlining how much you’ll pay each month over three to five years. It’s your responsibility to make these payments on time and in full, as failure to do so could result in the dismissal of your case and the loss of bankruptcy protection.

Debtor’s Benefits in Bankruptcy

Filing for bankruptcy also comes with significant benefits, including helping you regain control of your finances and build a more stable future.

1. Automatic Stay Protection

One of the most immediate benefits of filing for bankruptcy is the automatic stay. As soon as you file, the court issues an automatic stay that halts most collection activities against you. This means creditors must stop all attempts to collect debts, including wage garnishments, foreclosure proceedings, repossessions, and lawsuits. The automatic stay provides breathing room to address your financial situation without constant pressure from creditors.

2. Discharge of Eligible Debts

The primary goal of filing for bankruptcy is to obtain a discharge of eligible debts. In Chapter 7, many unsecured debts, such as credit card balances, medical bills, and personal loans, are wiped out entirely. In Chapter 13, some debts may be partially repaid through a court-approved repayment plan, and any remaining eligible debts may be discharged at the end of the plan.

This discharge provides a fresh start by eliminating the legal obligation to repay discharged debts, allowing you to move forward without the burden of unmanageable debt.

3. Protection of Essential Assets

While the idea of losing assets in bankruptcy can be intimidating, both Chapter 7 and Chapter 13 offer exemptions that protect essential property, such as your home, car, retirement accounts, and personal belongings. Exemptions vary based on state and federal laws, and choosing the right set of exemptions can help you retain what you need to rebuild your life.

In Chapter 13, you can often keep all your assets as long as you comply with your repayment plan. This is especially helpful if you have significant equity in your home or other valuable property.

4. Opportunity to Reorganize Debts

For individuals who file for Chapter 13, bankruptcy offers an opportunity to reorganize debts into a manageable payment plan. This plan is designed based on your income, expenses, and the amount of debt you owe. It allows you to catch up on missed payments for secured debts, such as your mortgage or car loan, while still discharging eligible unsecured debts at the end of the repayment period.

Contact Wadhwani & Shanfeld

Filing for bankruptcy comes with both responsibilities and significant benefits. Understanding your duties as a debtor—such as accurately disclosing your financial information, cooperating with the trustee, and completing mandatory counseling—ensures that you comply with bankruptcy laws and achieve the best outcome for your case. At the same time, bankruptcy offers valuable benefits like the automatic stay, discharge of debts, and asset protection, allowing you to reset your financial life.

If you’re considering bankruptcy and need guidance on your responsibilities and potential benefits, contact Wadhwani & Shanfeld. Our experienced bankruptcy attorneys can help you navigate the process, fulfill your duties, and secure the financial relief you need. Reach out today for a consultation and take the first step toward a fresh start.

Source:

uscode.house.gov/view.xhtml?path=/prelim@title11/title11a/node2/partIV&edition=prelim