How Does an Emergency Bankruptcy Filing Work? Is It a Good Option?

The bankruptcy process can help you reset your finances and start over. Most people see their finances getting out of control and plan before they file for bankruptcy. However, sometimes your first hint that things are out of hand is receiving a repossession notice or a notice of wage garnishment from a creditor. In these cases, filing for bankruptcy may take too long to give you the debt relief you need. What can you do to keep the lights on while you arrange things with your creditors?

The solution may be an emergency bankruptcy. Bankruptcy law allows debtors to begin the bankruptcy process and get some immediate protection. There are some strict requirements for filing an emergency bankruptcy you should discuss with a bankruptcy lawyer. This article will explain the important points to know if you find yourself in a critical financial situation.

Also known as a “bare-bones” or “skeleton” bankruptcy, an emergency bankruptcy lets debtors file the bankruptcy petition and a list of creditors without other documents. Filing the petition gives you the case number and automatic stay protections immediately.

You must be facing an actual emergency to be eligible for this filing. Examples include imminent wage garnishment causing you serious financial harm or a repossession removing a means of transportation required for your employment. There must be a good reason why you cannot just file a standard bankruptcy and wait for the process.

Required Filings for an Emergency Bankruptcy

The emergency bankruptcy is called a “bare-bones” bankruptcy because you only file the minimum documents needed to stop creditor actions. These include:

• The bankruptcy petition
• The creditor matrix with the names and addresses of your creditors
• Social Security identification form
• Proof of Credit Counseling course

You must complete a credit counseling course within 180 days before filing, which may be difficult in an emergency. Approved credit counseling agencies can provide the certificate the same day you finish the course. If you can’t complete the course, you must provide a certification stating why. Additional forms are required to request a fee waiver or to pay in installments.

These are the “bare-bones” forms that must be included in your emergency petition. Any missing forms can result in your petition and your bankruptcy being dismissed. In addition, local courts have their own rules about what documents must be filed. Always check with a local bankruptcy attorney before filing.

Automatic Stay

The automatic stay halts almost all collection actions as soon as it is filed. The court notifies your creditors. The stay stops all collections, including:

• Foreclosures and repossessions
• Wage garnishments
• Lawsuits and liens
• Harassing phone calls, texts, and emails
• Eviction orders and utility shutoffs

There are some things the automatic stay doesn’t do. It won’t prevent any criminal proceedings from going forward or stop wage garnishment for child support, alimony, or similar court-ordered payments. If you file after your landlord has already received a judgment and order for eviction, the automatic stay may not prevent it.

If you’re facing foreclosure, don’t rely on the automatic stay alone. Contact a foreclosure attorney and let them know what you’re doing.

Emergency Bankruptcy: The 14-Day Deadline

Emergency bankruptcy is not a shortcut or loophole. It’s a way to start the process earlier. Within 14 days (two weeks) of the initial filing, you must still complete the entire packet for a Chapter 7 or Chapter 13 bankruptcy and file it.

Once you’ve started by filing the bankruptcy petition, you cannot stop, change your mind, or decide you’re too busy to finish the work. Within 14 days of the initial filing, you must:

• Complete all required bankruptcy forms with all assets and exemptions (10 sections)
• Complete the Statement of Financial Affairs
• Complete the Chapter 7 means test or Chapter 13 income calculation to determine your eligibility to file bankruptcy
• Collect your last two months’ pay stubs
• Include your most recent tax return
• Provide the credit counseling certificate if you did not complete it prior to filing

Preparing your bankruptcy filing requires about 10 to 20 hours of detailed work and must be accurate and signed under penalty of perjury. Under the Federal Rules of Bankruptcy Procedure 1007(c), this is a fixed deadline.

This is not meant to discourage potential filers in an emergency. However, consider your financial situation and circumstances. If you can’t realistically gather your financial documents, complete the forms within 14 days, and file your completed bankruptcy case, an emergency filing might not work for you.

If You Miss the Deadline

You won’t be sanctioned or criminally penalized if you don’t make the 14-day deadline, but the consequences may be just as bad. Missing your deadline can cause the following:

• The automatic stay ends immediately and without notice to you
• Your bankruptcy is automatically dismissed without hearing
• You forfeit the filing fee ($313 for Chapter 13 or $338 for Chapter 7)
• Creditors may resume all collection actions
• There is a 180-day waiting period to file again if you willfully fail to comply
• You may face bad-faith claims when you do file

It’s important to make sure you’re prepared and able to follow through on an emergency bankruptcy filing.

Serial Filers

Bankruptcy court is intended to provide occasional debtors with a fresh start and freedom from unsecured debts. U.S. courts frown on those who fall into debt and use bankruptcy as a way to get out on a regular basis. “Serial filers” who have had a dismissal within the past year do not have the same protections as others, regardless of the reasons or circumstances.

If you’ve had a dismissal within the previous 365 days, a new automatic stay only lasts 30 days. For two or more dismissals within a year, there is no automatic stay unless the court grants it after you prove you’re filing in good faith. Like the 14-day deadline, this limitation is part of the Bankruptcy Code. If you’ve had a personal bankruptcy dismissed within the past year for any reason, consider speaking with a bankruptcy attorney before filing again.

When You Need Legal Assistance

If you’re considering any type of bankruptcy, it’s a good idea to speak with a bankruptcy attorney. Filing an emergency bankruptcy petition is only your first step. You must still choose between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy, value your assets, and get everything you need for the filing.

If you’re not a good candidate for an emergency bankruptcy, an attorney can explain why and review other alternatives, such as credit counseling programs or loan modification. They’ll deal with the bankruptcy trustee, appear with you at the creditors’ meeting, and file your petition in accordance with the rules of the local bankruptcy court.

Bankruptcies are tricky and require skilled legal advice. Emergency bankruptcy filings are risky even for experienced attorneys. If you’re facing foreclosure or repossession, a bankruptcy attorney can be a tremendous advantage. Most offer free initial consultations, and many can file your case within hours.