Worried about a creditor's threats? Filing for bankruptcy creates an automatic stay that puts the brakes on debt collection efforts, but getting everything together and ready to file the petition takes time.
Emergencies happen in all aspects of life. When a debtor finds themselves in an urgent situation with a creditor collection action, it's good to know about emergency bankruptcy.
What Is an Emergency Bankruptcy Filing?
Commonly called a "skeleton" bankruptcy filing, an emergency bankruptcy is a streamlined process available to a debtor who has to get that automatic stay immediately.
It involves completing certain online information to put the stay in place, then submitting the remaining required documents later. It is handy to have a bankruptcy attorney to help with this.
One of the great benefits of an individual bankruptcy filing is the automatic stay feature. The stay is automatic as soon as the bankruptcy petition is accepted. It orders a halt to all creditor collection issues, from phone calls to foreclosures.
But putting together all the forms for a bankruptcy filing is not the work of a moment. Even when working with a bankruptcy attorney, it can take a debtor several days or even weeks to organize the requested financial data.
And if there is an imminent collection action, such as a home foreclosure, vehicle repossession or wage garnishment that will endanger an important asset of the debtor, faster action is required.
Minimal Forms Required to Commence Bankruptcy Process
This is the purpose of emergency bankruptcy, also known as skeleton bankruptcy, bare-bones filing or incomplete filing. It allows a debtor to file only those minimum required bankruptcy forms necessary to open the case.
The debtor can accomplish this rapidly and benefit from the automatic stay. But they must complete all remaining forms within two weeks to prevent the case from being dismissed by the bankruptcy court judge.
Who Qualifies for Emergency Bankruptcy?
Can anyone file for emergency bankruptcy? Essentially, anyone eligible to file for bankruptcy is eligible to file for emergency bankruptcy.
That means that a person wishing to file for an emergency Chapter 7 bankruptcy must determine in advance whether they are eligible to file for a regular Chapter 7 bankruptcy, and the same is true for other types of bankruptcy.
For example, to file for a Chapter 7 bankruptcy, a debtor must pass a means test that involves comparing the debtor's monthly income to the mean monthly income in their state.
While a debtor is not required to fill in and submit the means test forms as part of the emergency filing, it pays to complete the test beforehand in order to avoid dismissal later on. In addition, there are certain income requirements to file for Chapter 13 bankruptcy.
Waiting Times Between Discharges
Anyone who has filed previously for bankruptcy needs to understand the waiting times between discharges. Discharge – where non-exempt debts are forgiven – is usually a critical goal of a debtor.
Under the Bankruptcy Code, the debtor must wait out this period after a first bankruptcy discharge before they are eligible for a second bankruptcy discharge.
The Code also states that a debtor who has filed two or more bankruptcies within the past year is not eligible for the automatic stay upon filing their subsequent case. Although the debtor can apply for a stay, it requires a hearing first. That means that an emergency filing will not protect the debtor from an imminent collection action.
How Emergency Bankruptcy Filing Works
In order to file an emergency bankruptcy petition, a debtor must follow certain procedures, including:
1. Hire an attorney
Bankruptcy rules are complex, so it is always a good idea to obtain legal representation. Sometimes free legal assistance is available through community Legal Services.
2. Select the appropriate type of bankruptcy
A debtor filing for an emergency bankruptcy must select the type of bankruptcy case for which they are applying. The different types of bankruptcy cases are referred to by the chapter in the Bankruptcy Code in which they are described.
Chapter 7 bankruptcy is by far the most common, especially for individuals. Also called "liquidation" bankruptcy, it involves the sale of those debtor's assets that are not exempted under the bankruptcy laws to pay as many debts as possible.
The bankruptcy discharge applies to most, but not all, of the remaining unsecured debts, like credit card bills and medical debts. Debts such as federal student loans and taxes are usually not discharged in bankruptcy.
Chapter 13, known as "reorganization" bankruptcy, does not require the sale of assets. Rather, the debtor proposes a new schedule of debt repayment.
3. Complete credit counseling
To file for bankruptcy, a debtor must show that they have completed a credit counseling course offered by a provider approved by the court. This also applies to emergency bankruptcy filings. Most providers offer the course online, by phone, or both, and it can often be completed in an hour or two.
4. Fill out minimal required forms
To file for an emergency bankruptcy, a debtor must complete the basic forms required by the court.
Four forms are mandatory everywhere:
Ask the court clerk of the bankruptcy court where the petition is to be filed whether any additional forms are required.
Legal Advice Recommended but not Required
While a debtor is not required to work with an attorney to submit their emergency bankruptcy filing, it is usually a good idea. The Bankruptcy Court warns a filer that the law and the forms can be complicated, as can the rules of court.
Anyone filing without an attorney – termed a pro se litigant – is expected to be familiar with, and to follow, federal court rules and procedures, as well as the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, and the local rules of the court in which the case is filed.
How to Find an Emergency Bankruptcy Attorney
Generally, the same attorneys that a debtor might hire for a regular bankruptcy case will assist with an emergency filing. It's a good idea to ask friends, coworkers, or a family attorney for recommendations.
City, state or national bar associations are groups of attorneys that usually are happy to provide lists of available lawyers in a specialty area. Those without funds to pay an attorney can try calling their local Legal Services.
Emergency Bankruptcy FAQs
How fast can you claim bankruptcy?
It doesn't take very long to file for an emergency bankruptcy. Although filling out all of the financial forms and gathering the documents is often a longer procedure than a debtor might think, the emergency bankruptcy procedure allows a debtor to obtain an automatic bankruptcy stay within hours.
This halts all creditor collection actions, but the remainder of the forms must be completed within 14 days.
The time it takes to complete the regular bankruptcy case is obviously much longer.
- Chapter 7 bankruptcy cases are relatively rapid; the average period of time between the moment the petition is filed until the case is closed is around four months.
- Chapter 13 cases can take much longer.
Can a bankruptcy be forgiven?
When a debtor talks about "forgiving" a bankruptcy, they are usually referring to the bankruptcy discharge. For example, during an individual's Chapter 7 bankruptcy proceeding, their non-exempt assets are sold to pay down their debts.
Those unsecured debts that are not covered by the amount received from the sale of assets are discharged, or forgiven. Some types of debts, including family support debts, federal student loans and federal taxes are usually not discharged.
How much does bankruptcy cost?
Filing a bankruptcy petition costs between $300 and $400, depending on the type of case. And there is a fee of around $50 for mandatory credit counseling. It should be noted that the court charges additional fees for various other actions, including:
- Obtaining copies of bankruptcy documents.
- Certifying a document.
- Reproduction of an audio recording.
- Amending any filed document.
- Conducting a search of the bankruptcy court.
- Filing a complaint ($350).
- Converting a case to another type of bankruptcy.
- Reopening a closed bankruptcy case ($1,000 or more).
The total cost of a bankruptcy depends on how complex the matter becomes and what actions are taken in court. In addition, if a debtor hires an attorney, they will be required to pay attorney fees.
How are bankruptcy attorneys paid?
The debtor signs an attorney-client agreement with the lawyer they hire to assist them. They can charge an hourly fee or a project fee that covers the entire proceeding or some distinct part of it. The agreement depends entirely on the attorney or law firm hired and the amount of work involved.
Generally, bankruptcies under Chapter 13 – reorganization bankruptcies – require much more attorney effort than do Chapter 7 bankruptcy cases.
In addition, Chapter 7 bankruptcies are quicker, resolving within about four months, while those under Chapter 13 take far longer because the attorneys must put together a proposed repayment plan for all creditors and get court approval for it.
What are the costs of filing?
For these reasons, a debtor should expect to pay more in attorney fees for a Chapter 13 bankruptcy petition than for a Chapter 7 bankruptcy. Generally, Chapter 7 fees must be paid entirely upfront, which makes sense since, at the end of the matter, the filer's unsecured debts have been discharged.
The good news is that Chapter 13 fees can often be paid in installments over time through the reorganization plan. The filer pays the bankruptcy trustee every month, and the trustee pays creditors, including the attorneys.
Bankruptcy lawyers in Chapter 13 cases can seek priority in receiving their payments before other creditors. This reduces their risk of not being paid if the debtor stops making payments.
Do you pay a fee to file bankruptcy?
Yes. There is a filing fee to submit a petition in bankruptcy court. This is generally between $300 and $400, depending on the type of petition that is filed. Currently, the fee for a filing under Chapter 7 is $335 and Chapter 13 is $310.
Will a bankruptcy affect my credit score?
Yes, a bankruptcy negatively impacts the credit score of the debtor. This makes sense since the credit score is a measure of the probability that the debtor will repay someone that lends them money. In most bankruptcies, the debtor seeks to have their debts discharged or otherwise repays creditors only partially.
The negative effect lasts for between seven and 10 years, which is how long a bankruptcy can remain on the debtor's credit record.
- Investopedia: Bankruptcy
- U.S.Courts: Bankruptcy Forms
- U.S. Courts: Federal Court Finder Search
- U.S. Courts: Chapter 7 Means Test Calculation
- U.S. Court: Filing Without an Attorney
- U.S. Courts: Bankruptcy Fees
- Justia: Emergency Bankruptcy
- Bankruptcy Talk: Attorney Fees for Bankruptcy
- CFPB: How a Bankruptcy Affects Credit Score
Teo Spengler earned a J.D. from U.C. Berkeley's Boalt Hall. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an M.A. and an M.F.A in creative writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.