The bankruptcy essentials you should know

What is bankruptcy?

Bankruptcy is an expression used to mean insolvency, which is a condition in which a person's liabilities exceed his or her assets, or in which current cash flow is not sufficient to meet current debts. As a result of the condition, the debtor may take advantage of protections afforded by the Bankruptcy Code.

Immediately upon filing for bankruptcy, the law imposes an automatic stay that prohibits all collection activities. Everything must stop at once, including foreclosures. Over time, the stay may be lifted or suspended so that collection activities may resume. The law does allow a breathing spell to allow the debtor and his or her attorney time to analyze their options.

The Bankruptcy Code underwent a dramatic change with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA.) Bankruptcy is now a much less consumer-friendly thing than it used to be, and it places greater demands on bankruptcy lawyers.

How can the bankruptcy laws affect my foreclosure buying?

Borrowers always have the option of seeking bankruptcy protection from their creditors. The decision can be made at the last possible moment, minutes before the fall of the auctioneer's gavel. Under some circumstances, completed foreclosures can even be reversed.

You should have a good understanding of bankruptcy fundamentals so you know when to be worried, when to proceed full speed ahead, and when someone is bluffing you.

Can I follow the process of bankruptcy cases without hiring my own lawyer?

Bankruptcy case documents are now online and available to the public via the PACER System. The website is http://pacer.psc.uscourts.gov. Access requires the use of a debit or credit card in order to set up an account. There is a charge of 8¢ per page for each document downloaded or viewed, with a maximum charge of US Dollars 2.40 per document, no matter how large it is. You must know the name of the debtor to review his or her bankruptcy case. Usually, you will not need to see specific bankruptcy motions and orders, but only the docket sheet. The docket sheet is a listing of all documents filed in the case.

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