To obtain relief from repayment of debts, an individual may petition the bankruptcy court to discharge the debts or to schedule a repayment plan.

The bankruptcy court will send notice of the petition (Order for Meeting of Creditors or Notice to Creditors) to the listed creditors.

The bankruptcy court will, subsequently, rule on the extent to which the debts may be discharged and advise creditors accordingly.

Follow HALLEX I-1-2-3C. when a debtor has filed for bankruptcy and attorney fees are involved.

Follow instructions in GN 02410.221 when a debtor has filed for bankruptcy and garnishment is involved.

The filing of a bankruptcy petition results in an automatic stay of collection activity with respect to the debtor and any minor child or legally incompetent adult child with the debtor as the representative payee and any contingently liable person.

EXCEPTION: This automatic stay does not apply to any other jointly and severally liable person who is not a party to the bankruptcy action.

Once notified that a debtor has filed a bankruptcy petition, SSA will:

1. a. 

   Stop all recovery efforts immediately including adjustment or billing (GN 02215.195E.), and

2. b. 

   Decide whether or not to file a claim with the court (GN 02215.195F.), and

3. c. 

   Consider referral to the Regional Chief Counsel (RCC) for possible filing of an objection to discharge (GN 02215.196).

IMPORTANT: Always refer to the RCC if fraud or similar fault (GN 02215.196) is involved.

The bankruptcy judgment is binding on SSA, with any repayment limited to the terms of the bankruptcy order.

EXCEPTION: If the RCC is successful in objecting to the discharge of a debt (GN 02215.196), SSA may be able to resume full recovery efforts.

1. a 

   Unlike bankruptcy cases filed under Chapter 13, a Chapter 7 bankruptcy does not involve a plan to repay debts over a period of time. Evidence of the debtor's assets is required by the court when a petition is filed under Chapter 7. It is, therefore, not necessary to develop evidence of assets. Where appropriate, the court may mark the notice “No Assets.”

2. b 

   A Chapter 7 bankruptcy applies to all existing debts whether or not specifically included in the petition. Currently, a debt exists if the payments comprising that debt were made prior to the bankruptcy filing date (i.e., a pre-petition debt). It is not necessary for the debt to be identified in the petition or for the debt to have been identified by SSA.

If SSA is not notified of a bankruptcy filing prior to actual discharge, see GN 02215.230A.2.. for appropriate action.

A Chapter 11 (debtor in possession) petition is usually filed by a business rather than by an individual. , If SSA is listed as a creditor refer the notice to the appropriate RCC for review and any needed action.

A Chapter 12 petition is a repayment plan filed by a farmer. Processing is the same as for a Chapter 13 plan.

A Chapter 13 (wage earner plan) petition is a request that all or a portion of the indebtedness be repaid through a trustee for a specific period of time. When a repayment plan has been completed, the debtor has no further repayment obligation for the listed debts. A Chapter 13 filing is available only to debtors with a regular source of income. A Chapter 13 bankruptcy applies to only those debts specifically included in the petition. Even where SSA has no advance notice of the filing, we are still subject to the stay and must refund anything collected if we receive notification that we are in violation of the stay.

REFERENCE: For a Chapter 13 bankruptcy order which attempts to divert SSA monies to trustees, see GN 02410.005.

REMINDER: The majority of bankruptcy claims which involve SSA debtors are Chapters 7 and 13. Since both Chapters 7 and 13 create an automatic stay from recovery of any debt that arose before the filing of the bankruptcy petition, SSA must stop collection. Even where SSA has no advance notice of the filing, we are still subject to the stay and must refund anything collected in violation of the stay.

The two major time tables involved in bankruptcy proceedings are the 180-day deadline and the 60-day deadline.