Emergency bankruptcy is an option for debtors who need to get bankruptcy protection right away. When you file for bankruptcy, something called an "automatic stay" is put into place. This is essentially a rule that stops creditors from taking any kind of collections activities against you. These collections activities might include an eviction, a foreclosure, a car repossession, or a wage garnishment. If collections activities are currently being taken against you, or if you expect that a creditor is going to begin aggressively coming after you, you may wish to consider filing an emergency bankruptcy.
Why File Emergency Bankruptcy?
Typically, when you file for bankruptcy, there is a whole host of legal paperwork, forms and schedules that need to be completed. You'll need to do things like list all of your creditors, your assets, your debts owed and other financial information. All of this can be very time consuming and technical, and it might take you some time to get the process completed properly. In some cases, this is time you simply do not have. For instance, you may need to file an emergency bankruptcy when exigent circumstances, such as the following, exist:
- Pending repossession
- Pending foreclosure
- Pending eviction
- Pending judgment that will place a lien on property/assets, as once a lien is placed, it may be harder or even impossible to have it removed.
- Wage garnishment that is preventing you from getting the money from your paycheck that you need to live.
While, in some cases, actions like a repossession or foreclosure can be reversed if they happen immediately before a bankruptcy, it is better to stop the action in its tracks by getting the protection that an emergency bankruptcy provides.
Emergency vs. Traditional Bankruptcy
When you file for emergency bankruptcy, instead of completing all of the required forms, you usually need to complete only the first three pages of the bankruptcy petition to get the process started. You'll also need to pay a fee for filing, which is higher than for a traditional bankruptcy (approximately twice the cost). If you don't actually have the money to pay the fee, you might be able to get a waiver. You will also be able to avoid the pre-bankruptcy requirement that credit counseling must be completed within 180 days before the time of filing and be permitted to file even if this has not yet been done.
After filing, you have a week to provide the court with a complete list of creditors to whom you owe debts and with your socials security number. You also have up to 14 days from the time of filing to complete other required paperwork and steps involved in a standard bankruptcy proceeding.
Additional Expense of an Emergency Filing
When you file for bankruptcy, there are filing fees that you must pay in order to file your petition and paperwork with the court. These fees are generally set by the guidelines spelled out in Title 28 U.S.C. Sec. 1930(b) of the US bankruptcy code. According to this section of the bankruptcy code, the following are the basic filing fees for bankruptcy as of February 2010 (fees are subject to change periodically):
- $245 for chapter 7
- $235 for chapter 13
- $1000 for chapter 11
In the case of emergency bankruptcy, you are generally assessed a higher fee because of the fact that you are asking the court to rush the paperwork through. In some cases, you may pay two sets of filing fees since initial paperwork must be followed in order to get the case filed quicker, followed by the standard paperwork required. In other cases, your initial fee will simply be higher, usually around double. Filing fees for either traditional or emergency bankruptcy may sometimes be waived if you petition for a waiver and can demonstrate financial need and the inability to pay.
If you wish to have legal advice in the process of filing for bankruptcy, you will also need to pay legal fees. Most lawyers will charge an hourly rate, although some will charge on a flat rate basis. Because of the speed required for emergency bankruptcy, some lawyers will also charge more in order to prioritize and complete the paperwork for you. Be sure to discuss with your lawyer whether you will pay a premium for the emergency bankruptcy, and make sure you are comfortable with your fee agreement before deciding to work with an attorney.
Required Emergency Bankruptcy Documents
Several forms must be filed to begin the emergency bankruptcy petition process. These include:
- Voluntary petition (form B1). This form contains the debtor’s general information and attests that he or she was not influenced into declaring bankruptcy by an outside party.
- Creditor matrix. This is a listing of all the debtor’s creditors, their addresses, and their telephone numbers.
- Statement of social security number (form B21). This form verifies the identity of the debtor through his or her social security number.
- Certificate of credit counseling. This form verifies that the debtor has received the mandatory debt and credit counseling from an approved non-profit agency.
- List of creditors holding 20 largest unsecured claims (form B4). This form contains a list of creditors to whom the debtor owes the greatest amount of debt.
Typically, the first of the forms including the general information must be filed to begin the process with the rest of the forms listed above being filed within the first 7 days of the initial petition. Immediately after these documents are filed, along with the payment of a filing fee, the debtor is granted an automatic bankruptcy stay from any further actions by creditors. The court’s filing fee may be paid in payments or completely waived under certain circumstances by filing form B3A or B3B, respectively. This form must be presented with the documents listed above in lieu of the filing fee.
Deadlines for Additional Documents
Normally, all of the documents for a bankruptcy filing must be completed and submitted, but an emergency bankruptcy allows you to file a minimum number of papers to create a "bare-bones" filing with the bankruptcy court. The court will then give you a set amount of time, usually 2 to 15 days, depending upon the number of documents that need to be submitted and the specific circumstances of your case.
Specific Filing Deadlines for Emergency Bankruptcy
The bankruptcy court will give you a specific amount of time to file the rest of the documents that are required for a bankruptcy filing. This will ensure that your bankruptcy filing remains intact, so that your creditors cannot file to claim your assets for the debts. Within 7 days of filing an emergency bankruptcy petition, the following items are due:
- A list of creditor names and addresses on disk
- Exhibit D to the Voluntary Petition
- A Certificate of Credit Counseling
- Your personal information (including your signature and address)
- Form B21, which is the Statement of your Social Security Number
- Your application to pay the Filing Fee in Installments or an Application to Waive the Filing Fee
- Either 25 percent of the Total Filing Fee or the Total Filing Fee
Within 14 days of filing an emergency bankruptcy, the following items are due:
- Remaining schedules
- Remaining statements
- Remaining required documents
Consequences for Missing Emergency Bankruptcy Deadlines
If you do not file the items mentioned above by the specified dates, it could result in the dismissal of your bankruptcy case. This could lead to your creditors being able to sue for the debts that you owe. Even worse, you may be barred from refiling your bankruptcy case for a period of 180 days, which opens the door for creditors to file for ownership of your assets.
Court & Potential Risks
The same court will handle both emergency and regular bankruptcy petitions. The court will not have a separate section to deal with emergency cases. Any important papers can be filed later, while in the beginning showing only "skeletal" evidence to support the application. This is a helpful option for someone who may need more time to prepare their documents and evidence.
In general, a debtor who finds himself in adverse conditions and facing a removal of assets, will also be given more time to work with a bankruptcy lawyer. It will just be a matter of improving on this petition by showing the necessary evidence.
An emergency petition should only be filed for adverse conditions, and not as a result of wanting to speed up the bankruptcy process. These petitions may carry a greater risk of being dismissed, if not completed correctly.