Beware of “Emergency” or “2 Page” Bankruptcy Filings

09/25/11

avoid emergency bankruptcy petitionsA typical Chapter 7 or Chapter 13 petition requires you to submit well over 50 pages of documentation, including:

  • your schedules – which includes a detailed budget, a list of all creditors including addresses and account numbers, a detailed list of assets with estimated valuations, detailed information about sales, transfers, losses and recent payments to creditors, information about your and your spouse’s income over the past 3 years
  • your plan (in a Chapter 13)
  • a credit counseling certificate
  • pay advices documenting income for the past 6 weeks

In my experience, even the most organized bankruptcy filers will need around a week to 10 days to put all this information together.  For those less organized, it can take longer.

What happens, then, if you need bankruptcy protection immediately – perhaps to stop a pending repossession, wage garnishment or foreclosure?  In such an instance, the Bankruptcy Code does allow you to file an “emergency” petition consisting of only the first two pages of your petition + the credit counseling certificate.

You then have 15 days to complete the remainder of the paperwork and get it filed.

In the 24 years I have represented folks in bankruptcy cases, I have filed a handful of emergency petitions, but I only do so if there is a true emergency.   Besides requiring extra work on my end, I often find that emergency filers continue to have a difficult time gathering information and these cases often do not work out well.

This leads me into my warning to you that you should avoid lawyers and others who are quick to suggest an emergency, 2-page filing.  Unfortunately, there are an increasing number of marginally qualified lawyers, as well as some outright scammers who use the 2 page filing procedure to take your money without providing an appropriate level of service.   These people know that a 2 page filing will stop a foreclosure and other creditor action and that in most cases, you will get about 30 days relief from phone calls and creditor threats.  In 30 days, these 2 page scammers will be long gone and you will be stuck with an incomplete bankruptcy filing that will likely fail and leave you in a worse position with your creditors than you were before.

My feeling is that if your lawyer is not capable of preparing a complete petition, you should be very concerned.

Just the other day, I spoke to a woman whose lawyer filed a 2 page petition to stop a foreclosure, but never filed any additional paperwork, did not attend her 341 hearing or do anything to complete the Chapter 13.   After the trustee filed his extensive objection to Chapter 13 case, the lawyer converted this woman’s case to Chapter 7 and again failed to show up at her meeting of creditors hearing and has failed to file any of the schedules.  This woman has been in bankruptcy for over 2 months and paid her lawyer $700, yet has no idea what is going on or what to do.   In the meantime her mortgage lender filed and obtained relief from the automatic stay, which means that the woman’s hold on her house is tenuous at best.  Further, it is not at all clear to me that Chapter 7 is appropriate for this particular person for a variety of reasons.

My point here is that you should be very careful if anyone – lawyer or otherwise – recommends a 2 page emergency bankruptcy petition without a detailed explanation why and a specific plan to complete the schedules.   If a non-lawyer suggests this course of action, you are undoubtedly heading for trouble.   A recommendation for a 2 page emergency filing should trigger a red flag in your mind and you should proceed very carefully.

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