When people find themselves in financial trouble, they spend months contemplating their options. Bankruptcy is often thought of as a last resort and is put off until the very last minute. However, while someone is busy weighing their options, their creditor often moves against them. This legal action can result in a judgment and garnishment of wages. If this occurs, what recourse does an individual have? The answer may be an emergency bankruptcy filing. 

Fast Fact: In most cases, emergency bankruptcies are filed to prevent or stop collection activities.

An emergency bankruptcy petition, also known as a barebones or incomplete filing, includes the bare minimum amount of information required under the Bankruptcy Code. This petition initiates the protections afforded under the automatic stay, which takes place immediately upon filing. This means that all creditors must cease pursuing any collection efforts. In essence, an emergency petition permits the automatic stay to take effect even before the totality of the bankruptcy forms are completed. 

The automatic stay can prevent additional collection efforts, but it does not apply retroactively. Therefore it is essential to establish the automatic stay before a wage garnishment, repossession, bank levy, or foreclosure takes place.

It is essential to understand that filing for emergency bankruptcy doesn’t excuse the petitioner from submitting all the required bankruptcy paperwork. All forms must be submitted within 14 days after any emergency filing to avoid dismissal.

Which Forms are Necessary for an Emergency Filing?

While an emergency bankruptcy filing requires far less paperwork than a traditional bankruptcy filing, a minimum amount of forms must be submitted. 

There are two types of bankruptcy that individuals typically file – Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 7 is mainly utilized. However, if trying to stop the repossession of a vehicle or the foreclosure of a home, a Chapter 13 bankruptcy may be more practical. When filing an emergency case, the type of bankruptcy must be designated. It is not easy to change your filing designation midstream, so it is prudent to seek the advice of an experienced bankruptcy attorney. 

There are Eligibility Requirements 

To file Chapter 7, individuals have to pass a means test. Submitting a means test form is not a required part of the emergency filing; however, those filing should complete the calculations before filing in order to understand if they will ultimately qualify. 

If you’ve filed for Chapter 7 in the past, the Bankruptcy Code may prohibit you from doing so again. Specific waiting times are required between a prior bankruptcy discharge and a new bankruptcy. (The designated wait times only apply if the judge granted a discharge in the previous case). If the debtor does not qualify to file a new Chapter 7 case, a Chapter 13 filing may still allow the individual to catch up on delinquent payments.

There is a potential limitation on the automatic stay that may apply if a previous bankruptcy was filed and dismissed within the past year. If this is the case, the automatic stay in the new case will only have a 30-day duration. Individuals in this situation can file a motion along with their emergency paperwork to try to have the stay extended. If two or more bankruptcies were filed within the past year, the automatic stay applies – negating the primary reason for filing an emergency bankruptcy. 

If you are being harassed by creditors and need to prepare an emergency bankruptcy filing, call an experienced bankruptcy attorney as soon as possible. They can help you assess your options, determine your best course of action and help with all the paperwork. In these situations, time and accuracy are of the essence – and the attorneys at the Sarasota offices of Richard V. Ellis can help.