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Lecture Notes: Bankruptcy Liquidation |
The Petition and Standard Forms: What is required to start the bankruptcy case in court.
The Supporting Schedules: How is the debtor's financial information collected in a uniform fashion.
The Estate in Bankruptcy: What property is included and what property is excluded from liquidation.
Initiation of the Case in Court:
To start a case, file the forms and schedules. In most instances, these are standard forms required by the Supreme Court. Most lawfirms will use software that generates much of the documents based on the information supplied. Legal stationery suppliers will have form kits for sale, and there are consumer form kits for sale. The kits require typing the information onto forms. Fill out and file the following:
1. Voluntary Petition: form #1.
2. The filing and administration fee. (May be paid over time, but cannot pay court over time if the attorney has been paid up front.The court comes first. There's a separate form required to pay fees in installments.)
3. Clerks' Notice. Compare to attorneys signature on the form. Not an official form.
4. Corporate Resolution authorizing the filing of the petition, if the debtor is a corporation. Not an official form.
5. Attorney compensation statement. Frequently, attorneys attach their fee agreement as an addendum.
6. The Matrix!!! This is a list of creditors and will be used as a mailing list. Check local rules for mailing matrix rules.
7. Summary of Schedules. Do last, if your software doesn't do it for you.
8. All schedules
9. Statement of Financial Affairs.
Emergency:
If a case cannot be prepared completely in time, but filing is necessary, the initial petition and documents can be prepared with a filing fee and the matrix, but without the schedules and statement of financial affairs. These can be filed to get the case commenced under the jurisdiction of the court. The debtor will then have another 15 days to prepare and file the schedules and statement of financial affairs.
Significance of Filing the Petition:
- The debtor's interest in the debtor's property ceases! All the property now belongs to the estate in bankruptcy, so, the debtor is now broke. Consider what happens to debtors heirs if the debtor files bankruptcy today, and dies tomorrow.
-The instant of filing the petition provides an instant order for relief.
-At filing, there is an automatic stay, preventing creditors or claimants from taking any further action to collect their claims, except through the administration of the case in the bankruptcy court. Sometimes the debtor wants an emergency petition in bankruptcy filed (no time to prepare schedules) so that a pending sale of secured assets can be stopped by means of the automatic stay.
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