Bankruptcy, Banking and Credit Law in Montana

Bankruptcy refers to a legal process that is initiated when an individual or business cannot meet their financial obligations. The purpose of this process is to discharge as many debts as possible. Once the bankruptcy proceeding is completed, the person or business who filed for bankruptcy is no longer legally liable for the debts they have incurred. The bankruptcy court enters a discharge order, which releases the filer from their debts. From there, the person or business essentially has a clean financial slate; however, the bankruptcy will remain on their credit report for up to ten years.

There are different types of bankruptcy, all of which are governed by federal law. Consumer bankruptcy is filed when an individual person cannot pay back the debts they have incurred for their personal needs.

The most recognized of the consumer bankruptcy proceedings are filed under Chapter 7 or 13 of the United States Bankruptcy Code. A Chapter 7 bankruptcy proceeding involves an individual filing a bankruptcy petition. The individual who owes money, or the debtor, sells their assets in order to pay off their creditors. Alternatively, the debtor may settle or discharge their debts. When a debt is discharged, it is canceled after having gone through the Chapter 7 proceeding.

A Chapter 7 bankruptcy is generally utilized by those who have lower incomes but higher debts, such as credit card debt. However, Chapter 7 bankruptcy is also available to businesses lacking sufficient assets with which t repay their creditors. When filing this proceeding, the company will go out of business, and its assets are sold and used to pay off the business’ debts.

Chapter 13 proceedings are generally for people who regularly earn a higher income. The filer works to create a plan to repay a portion or all of their debts. This repayment plan consists of installment payments to all creditors who are owed money, and can last from three to five years. 

No matter what Chapter is being filed, bankruptcy can have lasting consequences for the debtor. As such, it should only be used as a last resort during times of dire financial circumstances. There are many considerations that should be reviewed prior to actually filing for bankruptcy.

How Do I Know Where to File Bankruptcy in Montana? Where Do I File for Bankruptcy If My Place of Residence Is Different from My Business?

Once a debtor has determined which chapter of bankruptcy would best suit their needs, they will need to gather the necessary financial documents, as well as fill out all appropriate legal forms. 

They will need to obtain a certificate proving that they have completed a mandatory credit counseling course, and file all of the above paperwork with their local federal bankruptcy court.All bankruptcy petitions are to be filed in a local federal bankruptcy court. This exact location will vary based on jurisdiction and state laws, as well as local regulations. Generally speaking, most rules will state that a debtor must file their bankruptcy petition with a court that is located in either the jurisdiction in which they have lived or operated a business within the last 180 days, or, six months.

To further clarify the 180-day rule, the debtor should file:

• Where their principal place of business is;
• Where their primary residence is; or
• Where the majority of the debtor’s assets are held.

As such, if the debtor is filing for bankruptcy in order to obtain relief from business debt, then it would make the most sense for them to file in the jurisdiction in which their business is located.

Alternatively, if the debtor is seeking relief from personal debts, they should file in a bankruptcy court that is closer to their primary residence. If creditors are expected to receive a considerably large sum in a bankruptcy case involving a particular asset, such as an expensive vacation home, the bankruptcy case may be filed in the jurisdiction in which that large asset is located.

Finally, if the debtor does not meet the 180-day requirement, they should file in the jurisdiction in which they have spent the majority of the past 180 days.

In terms of filing for bankruptcy in Montana specifically, the District of Montana maintains five divisions. The bankruptcy court holds its hearings in four of those divisions. On their bankruptcy court website, you can find more information regarding which specific division you should file for bankruptcy.

Will I Have to Go to a Montana Court to File Bankruptcy?

The bankruptcy process does not require many sessions in court; if there are no complicated issues, a debtor should only be required to attend court approximately three times. The first appearance would be to submit their bankruptcy petition and various financial documents. Second would be to appear at the mandatory 341 Meeting of the Creditors session. Third and finally would be their bankruptcy hearing in which a judge decides whether to grant or deny their request to declare bankruptcy.

Generally speaking, the bankruptcy process requires the following court appearances:

• Soon after the debtor files for bankruptcy at their local federal bankruptcy court, the clerk will schedule a court date for when the 341 Meeting of the Creditors is to be held. This is usually around 30 to 35 days later, and is mandatory;
• It is important to note that although the debtor is required to attend this meeting, which is held at the courthouse, it generally occurs in a conference room as opposed to in a courtroom. This meeting is unlikely to take place in front of a judge. During this meeting, the debtor speaks with the Trustee that is assigned to their bankruptcy case. Creditors are also invited to attend the meeting, but usually opt out. The meeting should last no longer than 5 to 10 minutes;
• If the 341 Meeting goes well and there are no other issues, the Trustee approves the discharge. The debtor should receive the discharge about 45 to 75 days later and will not need to appear in court a third time. This is how most Chapter 7 Bankruptcy cases proceed; and
• A third court appearance, which would take place in front of a judge, may be required. This would be if:
1. There is an issue with a Chapter 7 Bankruptcy case, such as a creditor is objecting;
2. The judge must confirm the repayment plan in a Chapter 13 Bankruptcy case;
3. State law mandates a third appearance; and/or
4. Any other legal problems arise that can only be resolved by a court.

According to Montana bankruptcy law, you will only need to attend the meeting of creditors. Otherwise, there are no court appearances unless there are any issues that must be addressed by a judge.

What Types of Papers Do I Need to Prepare for a Bankruptcy Filing in Montana?

To file bankruptcy in Montana, you will need to complete a packet consisting of roughly 24 different forms. These forms will require you to explain, in detail, everything you make, spend, owe, etc.

Some examples of these forms include, but are not limited to:

• A voluntary petition;
• Schedules A-J;
• Declaration regarding schedules;
• Summary of assets and liabilities; and
• Local forms.

What Are Some other Considerations When Filing Bankruptcy in Montana?

When filing for bankruptcy in Montana, it is important to note that Montana utilizes state exemptions, and not federal exemptions. 

Some other items that should be generally considered when filing for bankruptcy include:

• Know which bankruptcy to file for, and ensure that you are eligible to file for it;
• Ensure that you are not over the limit for the number of times that you can file for bankruptcy within a certain period;
• Understand your obligations under the particular chapter of bankruptcy that you filed for, such as which debts must be paid and which nonexempt assets will need to be surrendered in order to do so; and
• Be aware of updates or changes made to federal, state, and local bankruptcy laws, as these can affect your case, debt obligations, and legal rights.

Do I Need to Hire a Montana Lawyer for Assistance with Bankruptcy?

If you wish to file for bankruptcy in Montana, you should consult with an experienced and Montana bankruptcy lawyer. Although there are federal laws in place that govern bankruptcies, each state has its own bankruptcy laws and limits to take into consideration. 

An experienced and local bankruptcy attorney will be aware of how to best proceed according to Montana’s laws, and will also be able to help guide you through the entirety of the bankruptcy process. Finally, an attorney will be able to attend any creditor meetings, as well as represent you in a court of law, should any legal issues arise.