Bankruptcy Emergency Petitions: Reserve for Real Emergencies Only
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Emergency Petition: Stop the Creditors First
A Chapter 7 or Chapter 13 bankruptcy petition filing requires a large amount of information and the assembly and production to your bankruptcy lawyer a large amount of documentation. This can take some people weeks to manage on top of working their jobs, dealing with their kids, and doing everything else that needs doing on any given day. What do you do if you need the protection of the Bankruptcy Court fast in order to stop a collections action, such as a paycheck garnishment or foreclosure sheriff's sale, which will only be stopped when an actual petition for bankruptcy is filed with your local bankruptcy court? There is, when relief from collections harassment is required quickly, the possibility of filing an "emergency" Chapter 7 or Chapter 13 petition to quickly put into place, with the filing, the "automatic bankruptcy stay against collections," an injunction under Federal law that prevents any creditor from engaging in any collections activity. The emergency petition is filed with only your basic identify information, proof that you've taken a silly online credit counseling course, and a list of all of your creditors. All of the rest of the information required in a bankruptcy petition---a list of your assets, your income, your expenses, and transactions you've engaged in (and a lot of other information)---must then be filed 10 days later. In other words, it gives you relief from collections while you get all of that other information together. So what's the catch?
The Bankruptcy Emergency Petition: The Risks
There are a few problems with emergency petition filing that make many bankruptcy attorneys reluctant to file them at all. First, your attorney requires all of that larger amount of information up-front to determine some very crucial things about your case:
- Whether you are eligible for Chapter 7 bankruptcy or required to file a Chapter 13;
- Whether you have assets that will be seized and liquidated if you file a Chapter 7 bankruptcy;
- Whether you have engaged in transactions prior to the prospective filing that could constitute fraud under Michigan's or your state's law or under the Federal Bankruptcy Code;
- Whether you have transferred assets or property around in a way that could allow your friends or family-members to be sued for turnover of that property in a Chapter 7;
- Whether you can actually afford a Chapter 13 plan payment or how much you have to pay monthly in a Chapter 13 repayment plan;
- ... Among other things.
So no problem, right? You can file the emergency petition and, then, afterward, when you turn over the rest of the required information to your bankruptcy lawyer, if he or she determines that you have any of these problems, you can just dismiss the case, right? Wrong. There is no voluntary right of dismissal of a Chapter 7 bankruptcy case, and, if it turns out you have assets more valuable than those your attorney can protect in a Chapter 7, the Chapter 7 Trustee assigned to your case (who is the individual who does the seizing and liquidation of assets) will fight aggressively any attempt to dismiss the case voluntarily. Many attorneys refuse to file emergency petitions at all for these reasons. Many who do will charge more for the additional work and effort that an emergency petition requires (not least of which is the fact that many clients, once the emergency petition is filed and the automatic stay is in place, stopping the "emergency," suddenly get very relaxed about assembling and turning over that documentation to their lawyer). Others, including The Hilla Law Firm, will file emergency petitions initially only as a Chapter 13 bankruptcies, as you do have a near-absolute right to both dismiss a Chapter 13 bankruptcy or to convert it to a Chapter 7 bankruptcy. In this way, the emergency garnishment or foreclosure can be halted and, then, once the balance of your documentation is reviewed by your attorney and a Chapter 7 looks safe with regard to your assets and a form of bankruptcy for which you are eligible with regard to your income and there are no other issues involving fraud or other such concerns, it can then be converted to Chapter 7. Again, this comes with additional time and general hassle requirements for the attorney, so, on a case-by-case basis the initial fee required prior to filing anything at all may be higher than for a case filed in a non-emergency manner.
Emergency Petitions for Bankruptcy: The Bottom-Line
The bottom-line with regard to emergency petitions in bankruptcy is that, if you have been entertaining the thought of filing a bankruptcy without the assistance of an attorney in a hurry to stop some dire collections activity---stop entertaining that thought. If you could not determine off of the top of your head the answers to the bulletted questions/concerns above with regard to your own circumstances, you should consult an experienced bankruptcy attorney. Even from a practical standpoint---what needs to be filed and when after the skeletal emergency petition is filed---can be hairy for the non-experienced. If you miss the appropriate deadlines, your case will be dismissed by the court, and the creditors you worried about will resume their collections activity where they left off. If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.
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