Filing a Petition in Federal Court | Minnesota Bankruptcy Procedures

All bankruptcy cases are heard by federal courts, not state courts. Bankruptcy cases must be filed in federal courts. State courts are not permitted to hear these matters.

Types of Bankruptcy Proceedings

There are several types of bankruptcy proceedings that may be filed.

One commonly filed type of bankruptcy petition is a petition that requests that a bankruptcy trustee liquidate all nonexempt assets of a debtor and use the proceeds to repay any existing debt. All remaining dischargeable debt is extinguished.

  • Exempt assets of a debtor are generally basic necessities of life and small amounts of other luxuries, such as jewelry, etc. Exempt assets are not taken from the debtor. Many people will only have exempt assets, and there will be nothing remaining to liquidate.
  • Not all debts are dischargeable. Credit card debt is usually dischargeable. Debts to the government, such as taxes and student loans are generally not dischargeable.

Other types of bankruptcy proceedings that may be filed do not liquidate assets to repay creditors, but rather allow a debtor to reorganize and make payments over a set period of time, generally a feasible payment schedule, in order to allow the debtor to pay back existing debt. There may or may not be additional dischargeable debts.

Less common types of bankruptcy proceedings involve bankruptcy proceedings intended to help family farmers or family fisherman.

Filing a Bankruptcy Petition and Other Statements

After determining what type of bankruptcy case to file, the bankruptcy petition will initiate the proceedings. A bankruptcy case normally begins by the debtor filing a petition with the federal bankruptcy court. A petition may be filed by an individual, by a husband and wife together, or by a corporation or other entity.

The debtor is also required to file statements listing assets, income, liabilities, and the names and addresses of all creditors and how much they are owed.

The filing of the petition automatically prevents, or “stays,” debt collection actions against the debtor and the debtor’s property. As long as the stay remains in effect, creditors cannot bring or continue lawsuits, make wage garnishments, or even make telephone calls demanding payment. Creditors receive notice from the clerk of court that the debtor has filed a bankruptcy petition.

Some bankruptcy cases are filed to allow a debtor to reorganize and establish a plan to repay creditors, while other cases involve liquidation of the debtor’s property.

Resolution of the Case

In many bankruptcy cases involving liquidation of the property of individual consumers, there is little or no money available from the debtor’s estate to pay creditors. As a result, in these cases there are few issues or disputes, and the debtor is normally granted a “discharge” of most debts without objection. This means that the debtor will no longer be personally liable for repaying the debts.

Not all cases will resolve quickly and easily however.