Duties of a Debtor

Before we move on to the duties of a debtor in great detail, let's know who debtors are.

A debtor is an individual or legal entity who owes money to another individual or entity. The party to whom the debt is payable (owed) is called the creditor. The money that the debtor owes is called the debt or obligation. Sometimes he may also be referred to as obligor and the creditor as obligee. 

How s/he becomes a debtor?

An obligation usually arises from circumstances such as loans, credit extension, taxes, leases, medical bills, and tort claims for damages. Debts are often secured by collateral, such as a house or car, unless they are unsecured forms of debts like credit card debts, personal loans, advances, taxes, etc. In some cases, unsecured can become secured through various actions of law. We have already covered a blog on secured vs unsecured debts, just in case you want to go in detail. Particularly when enforcement of a judgment is filed, and a lien is attached, this might result in property seizure to satisfy a judgment debt.

 

What are the duties of a Debtor?

The duties and responsibilities of a debtor, be it an individual or an entity, may vary subject to the state laws and implications. It is prudent to speak to an expert bankruptcy attorney near you to get a better understanding of debt settlement because it is always individually assessed. In either personal or corporate bankruptcy, the debtor (or its representative(s)) has ongoing legal obligations to the Trustee or the creditors and/or to the Bankruptcy Court. Failure to fulfill which may result in either denial of a discharge or criminal prosecution. It is, therefore, a debtor’s duty to fully comply with all statutory requirements as applicable. Some of the apparent duties of a Debtor are as follows:

·        You are required by law to reveal all the assets including any property you own or have previously owned. You should inform the Trustee of any such asset or property (of any value) that you owned or were entitled to at the time of filing your bankruptcy.

·        You must give written notice to the Trustee of any inheritance of a property or money you receive before or within six months of the filing date of bankruptcy. This may come to you as a result of someone’s death, and you have been entitled as their heir.

·        You also need to give written notification to the Trustee of any sum of money or property that you receive as a result of a final divorce decree or the status of any domestic obligations you owe.

·        You should notify the Trustee of any money you may get as a beneficiary of a life insurance policy or as part of a death benefit plan that you may be entitled to prior or within six months of the filing of bankruptcy.

·        You must give written notice to the Trustee of any leases, or contracts or agreements that may entitle you to monetary compensation, or services or assets or property in the future.

·        You should always share the names and addresses of all the parties with whom any transfers or conveyances of gifts regarding any property were made or ordered if a schedule of property has not yet been filed pursuant to Rule 1007.

·        You need to provide written notice to the Trustee of all the debts repaid within the year prior to the date of filing bankruptcy unless the total amount was less than $1,000.

·        You need to provide written notice to the Trustee of any kind of tax refund of over $2,500 you anticipate receiving or have actually received it.

 

There are other general duties and responsibilities for a debtor that you must educate yourself on under rule 4002 and section 521.

 

Duties of Debtor under Rule 4002

Clause (a)In General. In addition to performing other forms of duties prescribed by the central Code and rules, the debtor shall:

·        must attend and submit to an examination as ordered by the court;

·        must attend the hearing on a complaint which objects to discharge and testify if called as a witness

·        must always cooperate with the trustee when it comes to the preparation of an inventory, examination of proofs of claim, and/or the administration of the estate;

·        must file a statement of any change of the debtor’s place and address.

 

 

Clause (b) Individual Debtor’s Duty to Provide Documentation to substantiate the presence.

 

(1) Personal Identification proof: Every debtor must bring to the meeting of creditors under §341:

(A) A picture identification proof issued by a governmental unit, or any other personal identifying item that establishes & further substantiates the debtor’s identity; 

(B) Evidence of their social security number(s), or written proof of the statement that such documentation does not exist.

 

(2) Financial Information: Every debtor must bring to the meeting of creditors under §341 and make it available to the trustee the following documents or copies of them or a written statement if the documentation does not exist or is not in debtor’s possession:

(A) Proof of evidence for current income such as the latest payment advice;

(B) Statements for each of the debtor’s financial depository and investment accounts, like checking, savings, and money market accounts, also including the mutual funds and brokerage accounts. 

(C) Detailed documentation of the monthly expenses as claimed by the debtor if required by §707(b)(2)(A) or (B).

(3) Tax Return, at least 7 days before the first date set for the meeting of creditors

(4) Tax Returns to creditors, if they request a copy at least 14 days before the first date of the meeting.

 

Final Word: As we discussed, the cases are individually assessed, and so the duties of debtors may be different besides the one already discussed under the clauses. It is always a good idea to hire a good bankruptcy lawyer and share your situation with them for better clarity and unbiased advice.