Chapter Three.
Filing a Petition
 After reading this chapter, you will be able to:
 Describe the “gatekeeper” provisions in
individual bankruptcy cases
 Understand how a bankruptcy is initiated, by
filing of a voluntary or involuntary petition
 Define prepetition credit counseling
 Describe how a voluntary bankruptcy petition
is filed by a debtor
 Describe how an involuntary petition is filed by
creditors
 Define an “order of relief”
Prepetition Credit Counseling
 Prerequisite to an individual debtor seeking
bankruptcy relief.
 An individual seeking bankruptcy relief may
not be a debtor and must participate in an
individual or group credit counseling session
from an approved credit counseling agency
within 180 days prior to the filing of a petition.
Exceptions to Prepetition Credit
Counseling
 First, the United States Trustee may exempt a district from the
requirement if the Trustee determines that approved credit
counseling services in a district are not reasonably able to
provide counseling services to individuals.
 Second, a debtor may file a certification with the court at the
time of filing stating that ‘‘exigent circumstances’’ merit a
waiver of the rule, provided that the debtor has made a request
for counseling services and could not obtain them within five
days of making a request from a counseling agency.
 The third exception to the prepetition credit counseling
requirement arises if, after notice and a hearing, the court finds
that a debtor is not able to comply with the requirement due to
mental incapacity, physical disability, or active military service in
a military combat zone.
Practice Pointer
 It is important to check the local rules for your
jurisdiction. Some courts will dismiss the case
automatically without a hearing if the
certification seeking a waiver is not filed with
the petition.
Debt Relief Agency
 A debt relief agency is any person, including
a bankruptcy attorney or bankruptcy petition
preparer, providing bankruptcy assistance to
assisted persons for money or other valuable
consideration pursuant to 11 U.S.C.
§101(12A).
 Debt relief agencies are subject to written
retainer and disclosure requirements of 11
U.S.C. §§527 and 528
Voluntary Bankruptcy
 A bankruptcy proceeding initiated by a debtor
filing a petition for relief.
 Also known as a voluntary petition.
 Most bankruptcy proceedings are voluntary.
Order of Relief
 A debtor is not legally bankrupt until the court
enters an order for relief.
 This order is automatic when a voluntary
petition is filed.
 It is the judgment that the petitioning creditors
seek in an involuntary petition.
Venue
 A proceeding may be commenced in any district
meeting one of the following qualifications:
 (1) the district in which the petitioner is domiciled,
resides, or has its principal place of business
 (2) the district in which the debtor’s principal
United States assets are located
 (3) the district in which the debtor has complied
with either of the above for the greatest portion of
the 180 days preceding the petition’s filing
Statement of Financial Affairs
 The Statement of Financial Affairs is a
questionnaire designed to elicit information
sufficient to determine whether the debtor
should receive a discharge or to reveal the
existence of preferences or other avoidable
transactions.
Schedules
 Schedules are an extended form of an
accrual-based financial statement disclosing
all liabilities and all assets of the debtor.
Involuntary Bankruptcy
 A bankruptcy proceeding initiated by one or
more creditors by filing a petition seeking the
entry of an order of relief, a judgment that the
debtor is bankrupt.
 Also known as an involuntary petition.
 Section 303 of the Bankruptcy Code governs
involuntary petitions.
Contested Involuntary Petition
 When an involuntary petition is contested, the
court must be able to make one of two
findings to enter an order for relief:


The first is that the debtor is not generally
paying its debts as they become due.
The second is that within 120 days prior to the
filing, a custodian has been appointed to
administer assets of the debtor.
Practice Pointer
 Under the Code, ‘‘insolvent’’ means a
financial situation in which the debtor’s debts
are greater than the fair valuation of all of
his/her assets, exclusive of any exempt
property or property improperly transferred or
concealed. See 11 U.S.C. §101(32).