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What are the consequences of filing for bankruptcy?

Depending on a debtor's financial condition and reasons for filing, the consequences of filing for bankruptcy protection may outweigh the benefits. The timing of the filing may be very important, and those considering bankruptcy should be aware of the following:

1. Filing for bankruptcy protection is not free.  How much are the court fees to file a bankruptcy?

2. Not all debts are dischargeable. For example, most domestic support obligations, most tax debts, and most student loan debts are not dischargeable. See response to FAQ (What is a bankruptcy discharge and what is the difference between denial of discharge and denial of the dischargeability of an individual debt?)

3. Within 14 days of the filing of a bankruptcy petition, schedules of the debtor's assets and liabilities must be filed with the Court. Failure to timely file the appropriate schedules will result in a dismissal of the bankruptcy case, and may bar the debtor from filing again for 180 days (6 months).

4. The Bankruptcy Code imposes time limitations on successive discharges as follows:

A. If a Chapter 7 or 11 discharge is entered by the Court, the debtor is prohibited from being granted another discharge in a later-filed Chapter 7 case (filed on or after 10/17/05) filed within eight years of the filing of the first case.

B. If a Chapter 7 or 11 discharge is entered by the Court, the debtor is prohibited from being granted another discharge in a later-filed Chapter 7 case (filed prior to 10/17/05) filed within six years of the filing of the first case.

C. If a Chapter 7, 11, or 12 discharge is entered by the Court, the debtor is prohibited from being granted another discharge in a later-filed Chapter 13 case (filed on or after 10/17/05) filed within four years of the filing of the first case.

D. If a Chapter 13 discharge is entered by the Court, the debtor is prohibited from being granted a discharge in a later-filed Chapter 13 case (filed on or after 10/17/05) filed within two years of the filing of the first case.

E. If a Chapter 12 or 13 discharge is entered by the Court, the debtor is prohibited from being granted a discharge in a later-filed Chapter 7 case filed within six years of the filing of the first case, unless (a) the debtor paid 100% of allowed unsecured claims in the Chapter 12 or 13 case, or (b) the debtor paid at least 70% of the allowed unsecured claims in the Chapter 12 or 13 case, the plan was proposed in good faith, and was the debtor's best effort.

5. Submission of fraudulent information, or commission of certain acts by the debtor can also be grounds for the denial of discharge of an individual debt, or for the denial of the discharge of all debts, and can also give rise to criminal charges. See response to FAQ(What is a bankruptcy discharge and what is the difference between denial of discharge and denial of the dischargeability of an individual debt?).

6. In some instances, transfers of property and/or payments made to (1) general creditors within ninety days prior to the filing of a bankruptcy petition, and/or (2) relatives within one year prior to the filing of a bankruptcy petition, are subject to being recovered by the bankruptcy trustee.

7. If the debtor is seeking to discharge utility bills from a utility company currently providing service to the debtor, the utility company may terminate services if the debtor does not pay a reasonable security deposit or provide other adequate assurance of payment within 20 days of the filing of the bankruptcy petition.

8. Depending on the timing of the filing of the bankruptcy petition, and what chapter of bankruptcy is filed, the debtor can be required to turn over state and federal tax refunds to the bankruptcy trustee.

Type: 
For Debtor