The Consumer Bankruptcy Toolkit

Bankruptcy > Consumer Bankruptcy | Published 25 February 2025 - Updated 13 February 2026 | UpLaw - uplaw.us

Module 1 is a letter given at the first meeting. It prevents more damage than everything else in this toolkit combined, and it costs a stamp.

Keywords: instruction letter, intake, exemptions, debts, chapter choice, transfers, filing, discharge

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Module 1 — Client instruction letter

Give this at the first meeting, in writing, and have the client acknowledge it.

Until your case is filed, and while it is pending:

DO NOT: ☐ Repay any relative, friend, or business associate — the trustee can sue them and take the money back ☐ Withdraw from or cash out a retirement account — it is protected, and using it pays debts that are about to be erased ☐ Transfer, sell, or give away any property ☐ Add or remove anyone from a deed, title, or bank account ☐ Use credit cards or take cash advances ☐ Take out a consolidation loan, especially one secured by your home ☐ Sell anything to a relative at any price

DO: ☐ Continue paying rent or mortgage, car payments, utilities, insurance, and ordinary living expenses normally ☐ Tell me immediately if you are sued, garnished, levied, or receive a foreclosure or repossession notice ☐ Tell me if you expect an inheritance, settlement, bonus, or large tax refund ☐ Keep every bill, notice, and letter

If anyone tells you to move money — call me first.

Acknowledged: ______________ Date: ______

Why this module is first. 11 U.S.C. § 547 reaches payments to an ordinary creditor ninety days before filing and to an insider one year. 11 U.S.C. § 548 and 11 U.S.C. § 544 reach transfers for less than reasonably equivalent value, with recovery under 11 U.S.C. § 550.

And a transfer with actual intent to defraud can support denial of the discharge entirely under 11 U.S.C. § 727 — turning an instinct to protect assets into the loss of the whole case.

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Module 2 — Intake questionnaire

Pressure What is happening right now? ☐ garnishment ☐ foreclosure sale scheduled for ______ ☐ repossession ☐ lawsuit ☐ levy ☐ collection calls only

What are you trying to keep? ______ (this, not the debt total, determines the chapter)

Income Six months of gross income, by month: ______ · Household size: ______ · Any recent job change: ______

Property Home — value ______ mortgage(s) ______ equity ______ · Behind? By how much? ______ Vehicles — value ______ loans ______ equity ______ · Behind? ______ Bank accounts ______ · Retirement ______ · Other ______

Transfers — the questions that prevent trustee litigation Paid any relative or friend in the last YEAR? ______ Transferred, sold, or retitled anything in the last TWO YEARS? ______ Added or removed a name on any deed or account? ______

Taxes Any unfiled returns? ______ (never dischargeable) · Any tax lien recorded? ______

Coming Inheritance, settlement, bonus, tax refund expected? ______

Other Co-signed debts? ______ · Student loans — federal or private? ______ · Support obligations? ______ · Prior bankruptcy filings and dates? ______

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Module 3 — Asset and exemption worksheet

Exemption set: ☐ State ☐ Federal · Residency rule satisfied? ______ (a recent move can mean the PRIOR state's exemptions govern)

Asset	Value	Loan against it	Equity	Exemption claimed	Non-exempt
Residence				Homestead
Vehicle 1
Vehicle 2
Bank accounts		—		Wildcard
Household goods
Clothing		—
Tools of the trade
Retirement accounts		—		Broadly protected
Life insurance cash value
Tax refund owed		—		Wildcard
Causes of action / claims		—
Other
				TOTAL NON-EXEMPT:	$______

Three reminders.

Equity, not value. A $9,000 car with a $7,500 loan has $1,500 of equity.

11 U.S.C. § 541 sweeps broadly — including causes of action, tax refunds, and, within a defined post-filing window, inheritances and settlements.

And lien avoidance under 11 U.S.C. § 522 is chronically underused. ☐ Any judicial lien impairing an exemption? ☐ Any nonpossessory, nonpurchase-money security interest in household goods or tools? Both are avoidable, and a removed judgment lien is frequently worth more than anything else in the case.

On claiming the exemption, note Schwab v. Reilly, 560 U.S. 770 (2010).

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Module 4 — Debt classification sheet

Creditor	Amount	Secured?	Discharged?	Notes

Classify every debt into one of these:

☐ General unsecured — credit cards, medical, personal loans, deficiencies. Discharged. ☐ Secured — mortgage, vehicle, purchase-money. Personal liability discharged; THE LIEN SURVIVES. ☐ Priority — 11 U.S.C. § 507: support, recent taxes, certain wages. ☐ Domestic support — never discharged. ☐ Taxes — dischargeable only if the timing rules are met; an unfiled year is never dischargeable; trust fund taxes never are; a recorded tax lien survives. ☐ Student loans — 11 U.S.C. § 523, absent undue hardship in an adversary proceeding. Check whether a private loan exceeds cost of attendance — it may be ordinarily dischargeable. ☐ Intoxicated-driving injury — never discharged. ☐ Fines and penalties to a governmental unit. ☐ Fraud or false written financial statement — creditor must object and prove it; see Lamar, Archer & Cofrin, LLP v. Appling, 584 U.S. 709 (2018) and Bartenwerfer v. Buckley, 598 U.S. 69 (2023). ☐ Willful and malicious injury. ☐ Co-signed — note for the co-debtor stay at 11 U.S.C. § 1301.

Total to be discharged: $______ · Total surviving: $______

If the second number dominates, say so plainly. The case may still be worth filing — it frees income and stops collection — but the client should choose knowingly.

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Module 5 — Chapter decision tree

1. Is there a foreclosure sale or repossession scheduled? → The filing date is urgent. 11 U.S.C. § 362 stops it on filing.

2. Are there arrears to cure on a house or car the client is keeping? YES → CHAPTER 13. Chapter 7 cannot cure arrears — 11 U.S.C. § 1322.

3. Is there non-exempt equity the client wants to keep? YES → CHAPTER 13, paying its value through the plan.

4. Is there a co-signer to protect on consumer debt? YES → CHAPTER 13 — the co-debtor stay, 11 U.S.C. § 1301.

5. Is there priority tax or support debt to pay over time? YES → CHAPTER 13.

6. Does the means test permit Chapter 7? 11 U.S.C. § 707 NO → CHAPTER 13 (or wait — see Module 7's timing).

7. Otherwise → CHAPTER 7.

And the honest caveat to give with any Chapter 13 recommendation: it requires three to five years of stable income, a substantial share of plans are not completed, and a plan failing late leaves the client without a discharge and with the payments spent. Modification under 11 U.S.C. § 1329 and conversion under 11 U.S.C. § 1307 exist — subject to the good-faith limit of Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007).

Means test notes

"Current monthly income" is the average of the six full months before filing. A recent job loss or a recent bonus changes eligibility depending on the filing month — a real timing lever.

And Ransom v. FIA Card Services, N.A., 562 U.S. 61 (2011): no vehicle ownership allowance where the car is owned free of any loan or lease.

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Module 6 — Transfer and preference screen

Run this before filing. Every "yes" needs analysis, and none of them is fatal if handled deliberately.

Question	Look-back	Yes?	Detail
Paid a relative, friend, or business associate?	1 year
Paid any single creditor an unusual amount?	90 days
Garnished wages taken?	90 days		May be recoverable for the estate
Transferred, sold, or gave away property?	2 years federal; longer under state law
Retitled a vehicle or added a name to a deed?	2 years+
Sold anything to a relative?	2 years+		Reasonably equivalent value?
Cashed out a retirement account?	Any		Where did the money go?
Made luxury purchases or cash advances?	Shortly before filing		Presumption of nondischargeability
Closed or moved bank accounts?	2 years
Repaid a loan secured by a co-signed debt?	1 year

The statutes: 11 U.S.C. § 547 preferences · 11 U.S.C. § 548 fraudulent transfers · 11 U.S.C. § 544 state-law reach · 11 U.S.C. § 550 recovery from transferees.

Preference defenses to consider: contemporaneous exchange for new value · ordinary course of business · subsequent new value · and the consumer small-payment threshold.

And the discharge risk. Actual intent to hinder, delay, or defraud supports denial of the discharge under 11 U.S.C. § 727. Disclose everything on the statement of financial affairs — non-disclosure is far worse than the transfer.

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Module 7 — Timing calendar

Filing date under consideration: ______

Six-month income window covers: ______ to ______ · Means test result: ______ Would waiting one month change it? ______

90-day preference reach-back begins: ______ Any payments inside it? ______ 1-year insider reach-back begins: ______ Any payments inside it? ______ 2-year fraudulent transfer window begins: ______ Any transfers inside it? ______

Tax dischargeability — which years qualify at the proposed date? ______ Which qualify if filed 3 months later? ______ Unfiled returns to be filed first: ______

Expected inheritance, settlement, bonus, or refund: ______ Inside the post-filing estate window? ______

Scheduled foreclosure sale / repossession: ______ → urgency overrides all of the above

Prior discharge date: ______ Waiting period satisfied? ______

DECISION: file on ______ · BECAUSE: ______

Every line above moves with the filing date. It is the most consequential single decision in the case, and it deserves a written analysis rather than a default.

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Module 8 — Filing day letters

Stay notice — creditor, employer, and sheriff

Re: [debtor] · Case No. [___] · Filed [date] in the United States Bankruptcy Court for the [] District of []

A bankruptcy petition was filed on [date]. The automatic stay of 11 U.S.C. § 362 is in effect immediately and by operation of law.

TO THE EMPLOYER: Stop all garnishment withholding effective the next payroll. Remit no further funds to the creditor. TO THE SHERIFF / LEVYING OFFICER: Cease all levy and sale activity, including any sale scheduled for [date]. TO THE CREDITOR: Cease all collection activity, including calls, letters, suits, and credit reporting of continued delinquency. Amounts garnished within ninety days before the filing may be avoidable as preferential transfers under 11 U.S.C. § 547, and demand is made for their return.

Violation of the stay is sanctionable. Direct all further communication to counsel.

Send this the same day, by fax and email where possible, to all three. The stay is automatic in law and requires phone calls in practice — garnishments do not stop by themselves, and the payroll department is frequently the party that needs to hear it.

Statement of intention worksheet

Secured item	Value	Balance	Equity	Choice
Residence				☐ retain and pay ☐ surrender
Vehicle				☐ surrender ☐ redeem (§ 722) ☐ reaffirm (§ 524) ☐ retain and pay
Financed goods				☐ surrender ☐ redeem ☐ avoid the lien (§ 522)

The decision rule.

Deeply underwater and needed → redeem if a lump sum can be arranged; specialty lenders finance this. Deeply underwater and not essential → surrender. The deficiency is discharged. Modest equity and affordable → retain and pay, reaffirming only if the lender requires it. Behind, and needed → Chapter 13, curing arrears and cramming down under 11 U.S.C. § 506.

⚠ REAFFIRMATION WARNING. Reaffirming voluntarily excepts that debt from the discharge. If the collateral is lost a year later, the deficiency is owed and no further discharge is available for years. Reaffirm only where the collateral is needed, the payment is affordable, and the equity justifies it. The court must find no undue hardship.

And ask whether the district and lender permit simply continuing to pay without reaffirming — the lien survives, personal liability does not, and the creditor is paid.

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Module 9 — Lien avoidance checklist

Underused, and frequently worth more than anything else in the case.

☐ Judicial lien impairing an exemption — 11 U.S.C. § 522. A judgment lien on a home that impairs the homestead exemption can be removed entirely. ☐ Nonpossessory, nonpurchase-money security interest in household goods, furnishings, clothing, appliances, books, animals, or crops held primarily for personal use. ☐ Same, in tools of the trade or professionally prescribed health aids.

Judgment creditor: ______ Recorded: ______ Amount: $______ Property value: $______ Senior liens: $______ Exemption claimed: $______ Does the lien impair the exemption? ______ Avoidable amount: $______

In Chapter 13, additionally: ☐ Strip a wholly unsecured junior mortgage, where senior liens exceed the property's value ☐ Cram down a vehicle loan more than the specified period old, under 11 U.S.C. § 506

And note the Chapter 7 limit: Dewsnup v. Timm, 502 U.S. 410 (1992) — a partially secured lien may not be stripped down in Chapter 7. Which is frequently the reason a homeowner needs Chapter 13.

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Module 10 — After discharge

The credit dispute letter — the step almost nobody takes

Pull all three reports ninety days after discharge. Free under 15 U.S.C. § 1681g.

Re: [consumer] · File [___]

The following accounts were discharged in bankruptcy on [date], Case No. [___], and are being reported inaccurately as owing a balance: [creditor · account number · reported balance]

Enclosed: the discharge order and the schedule listing each creditor.

Each account must be reported as discharged in bankruptcy with a zero balance. I request reinvestigation under 15 U.S.C. § 1681i, correction consistent with the accuracy requirement of 15 U.S.C. § 1681e, and confirmation of the results in writing. Reporting periods are governed by 15 U.S.C. § 1681c.

Discharged accounts reported as owing suppress a score for years, and the remedy is a letter.

Discharge violation letter

The debt you are attempting to collect was discharged on [date] in Case No. [___]. Your [letter / call] of [date] violates the discharge injunction of 11 U.S.C. § 524.

Cease all collection activity immediately, correct any credit reporting, and confirm in writing within [___] days. The remedy for continued violation includes contempt sanctions and fees. [Your conduct may also violate 15 U.S.C. § 1692e and 15 U.S.C. § 1692f, with damages under 15 U.S.C. § 1692k.]

The rest of the post-discharge list

☐ Keep the discharge order permanently, with the case number ☐ Note the anti-discrimination protections at 11 U.S.C. § 525 — a governmental unit may not deny a license or employment solely because of the bankruptcy ☐ Consider reopening to add an omitted creditor or avoid a missed lien ☐ Calendar the waiting period before another discharge is available ☐ Rebuild deliberately — secured card, on-time payments, low utilization

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Module 11 — Reference tables

Authorities

Authority	Proposition
11 U.S.C. § 101 · § 105 · § 109	Definitions; equitable power; eligibility
11 U.S.C. § 341 · § 342 · § 348	Meeting; notice; conversion
11 U.S.C. § 361 · § 362	The automatic stay
11 U.S.C. § 365 · § 554	Contracts and leases; abandonment
11 U.S.C. § 501 · § 502 · § 506 · § 507	Claims; secured status and cram down; priorities
11 U.S.C. § 521 · § 522	Duties; exemptions and lien avoidance
11 U.S.C. § 523 · § 524 · § 525 · § 526	Exceptions; the injunction; anti-discrimination
11 U.S.C. § 541 · § 544 · § 547 · § 548 · § 550	Estate; avoidance powers
11 U.S.C. § 707 · § 722 · § 726 · § 727	Means test; redemption; distribution; discharge
11 U.S.C. § 1301 · § 1302 · § 1306 · § 1307	Co-debtor stay; trustee; estate; conversion
11 U.S.C. § 1322 · § 1325 · § 1328 · § 1329	The Chapter 13 plan
28 U.S.C. § 157 · § 158 · § 1334 · § 1408 · § 1409	Jurisdiction, venue, appeals
Dewsnup · Marrama · Ransom · Schwab · Appling · Bartenwerfer	The decisions that shape consumer practice
15 U.S.C. § 1681c · § 1681e · § 1681g · § 1681i	Post-discharge credit repair

Vocabulary

The stay — automatic on filing; stops collection; does not keep collateral. The estate — everything owned, § 541. Exemptions — what comes back out. Equity, not value. The means test — Chapter 7's eligibility screen. Preference — a payment the trustee takes back. Reaffirmation — voluntarily giving back the discharge on one debt. Redemption — paying the collateral's value in a lump sum. Cram down — reducing a secured claim to collateral value, Chapter 13 only. Strip — removing a wholly unsecured junior lien. The discharge — an injunction against personal liability; liens survive.

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Module 12 — Where this connects

The narrative and the doctrine. The Fresh Start, Honestly Described: What Consumer Bankruptcy Does and Does Not Do and Consumer Bankruptcy: A Comprehensive Guide to Chapter 7, Chapter 13, Exemptions, and Discharge.

The step-by-step. Preparing and Filing a Consumer Bankruptcy Case: A Practical Checklist.

Business and Chapter 11. Bankruptcy Law: A Comprehensive Guide to Chapters 7, 11, and 13 · Chapter 11 Reorganization: A Comprehensive Guide for Debtors and Creditors · The Bankruptcy and Restructuring Toolkit.

From the creditor's side. When a Customer Files Bankruptcy: A Creditor's Checklist and Filing a Proof of Claim in a Bankruptcy Case: A Practical Checklist.

The debts that brought the client here. Sued by a Stranger: Debt Buyers, Default Judgments, and the Consumer Who Shows Up · Consumer Credit Reporting and Debt Collection: A Comprehensive Guide to the FCRA, FDCPA, and Identity Theft Remedies · Disputing a Credit Report Error and Defending a Debt Collection Suit: A Practical Checklist · The Consumer Debt and Credit Reporting Toolkit.

Student loans and taxes, the two categories that survive most often. Student Loans: A Comprehensive Guide to Repayment, Default, Forgiveness, and Discharge · Fixing a Student Loan Problem: A Practical Checklist · Tax Controversy for Individuals: A Comprehensive Guide to Notices, Audits, Appeals, and Collection · The Individual Tax Controversy Toolkit.

And the house. Foreclosure and Mortgage Servicing: A Comprehensive Guide for Homeowners and Counsel.

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Module 13 — Adjacent problems in the same file

Six neighbors that show up in consumer bankruptcy intakes often enough to screen for.

A pending eviction. The stay reaches most eviction proceedings, but with significant exceptions, and the timing is measured in days — see Thirty Days and a Padlock: How an Eviction Actually Works and Where It Can Be Stopped and Defending an Eviction and Enforcing a Tenant's Rights: A Practical Checklist.

A divorce in progress. Support obligations are never dischargeable, property settlements are treated differently from support, and the two proceedings interact in ways that reward sequencing them deliberately — see Divorce: A Comprehensive Guide to Dissolution, Property Division, Support, and Custody.

A failed business. Employment tax exposure under 26 U.S.C. § 6672 follows the responsible person personally and generally survives the discharge — see Starting and Running a Small Business: A Comprehensive Guide to Entity Choice, Licensing, Contracts, and Employees and The Small Business Formation and Compliance Toolkit.

A medical event. Medical debt is fully dischargeable, and the underlying coverage denial may still be appealable — see Denied: What to Do When a Health Plan Says No and Appealing a Health Insurance or Medicare Denial: A Practical Checklist.

A disability. It supports both a benefits claim and, for federal student loans, a total and permanent disability discharge outside bankruptcy entirely — see Filing and Appealing a Social Security Disability Claim: A Practical Checklist and The Student Loan Repayment and Discharge Toolkit.

And a scam. A person who lost money to fraud frequently arrives at insolvency, and the recovery window is measured in hours — see Responding to Fraud, a Scam, or Financial Exploitation: A Practical Checklist.

The intake question that finds all six: what happened that brought you here? — asked before the debt schedule, because the answer frequently identifies a claim, a benefit, or an appeal worth more than the discharge.

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Related Documents

Articles

• The Fresh Start, Honestly Described: What Consumer Bankruptcy Does and Does Not Do
• Sued by a Stranger: Debt Buyers, Default Judgments, and the Consumer Who Shows Up

Guides

• Consumer Bankruptcy: A Comprehensive Guide to Chapter 7, Chapter 13, Exemptions, and Discharge
• Bankruptcy Law: A Comprehensive Guide to Chapters 7, 11, and 13

Checklists

• Preparing and Filing a Consumer Bankruptcy Case: A Practical Checklist
• When a Customer Files Bankruptcy: A Creditor's Checklist

Toolkits

• The Bankruptcy and Restructuring Toolkit
• The Consumer Debt and Credit Reporting Toolkit